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Efficiency and equity in groundwater markets: the case of Madhya Pradesh, India

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  • KAJISA, KEI
  • SAKURAI, TAKESHI

Abstract

This paper examines efficiency and equity in groundwater markets with special attention to output sharing contracts and to the bargaining relationships between sellers and buyers, using household level data from Madhya Pradesh, India. Regression results find no significant inefficiency on farms managed by output sharing buyers, presumably because optimal input intensities are achieved through effective monitoring and contract adherence mechanisms embedded in long-term and intensive personal relationships between sellers and buyers. As for equity, the finding is that, while output sharing buyers pay higher water prices, the rate of premiums is merely 5 percentage points higher than the informal interest rate that they would have had to carry under other types of groundwater contracts. The results also show that buyers who have access to alternative water sellers pay lower water prices. These findings indicate that if the imperfection of credit and contingent markets in rural areas are taken into account, informal groundwater markets work fairly well in agrarian communities if monitoring and contract adherence mechanisms are embedded and a sufficient number of potential sellers are available.

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Bibliographic Info

Article provided by Cambridge University Press in its journal Environment and Development Economics.

Volume (Year): 10 (2005)
Issue (Month): 06 (December)
Pages: 801-819

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Handle: RePEc:cup:endeec:v:10:y:2005:i:06:p:801-819_00

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Cited by:
  1. Michler, Je ffrey D. & Balagtas, Joseph V., 2013. "The Determinants of Rice Storage: Evidence from Rice Farmers in Bangladesh," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150267, Agricultural and Applied Economics Association.
  2. Michler, Jeffrey D. & Wu, Steven, 2013. "Contracting for Groundwater Irrigation:A Principal-Agent Based Approach to Determining Contract Effectiveness," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149437, Agricultural and Applied Economics Association.

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