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Social contracts, markets and efficiency: Groundwater irrigation in North India

  • Banerji, A.
  • Meenakshi, J.V.
  • Khanna, Gauri

This paper uses primary data to analyze the institutions and informal markets that govern groundwater allocation in a sugarcane-cultivating village in North India. We find that, in contrast to earlier literature, the observed water trades result in efficient water allocation across farms. We interpret this and other stylized facts in terms of a social contract using a simple bargaining model with limited inter-player transfers. Poor functioning of the power sector leads to reduced pumping and a water supply constraint. Simulations show that power supply reform can significantly increase farm yields, and be financed out of increased farm profits.

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Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 98 (2012)
Issue (Month): 2 ()
Pages: 228-237

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Handle: RePEc:eee:deveco:v:98:y:2012:i:2:p:228-237
Contact details of provider: Web page: http://www.elsevier.com/locate/devec

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  1. Aggarwal, Rimjhim M., 2007. "Role of risk sharing and transaction costs in contract choice: Theory and evidence from groundwater contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 63(3), pages 475-496, July.
  2. Jacoby, Hanan G. & Murgai, Rinku & Rehman, Saeed Ur, 2001. "Monopoly power and distribution in fragmented markets : the case of groundwater," Policy Research Working Paper Series 2628, The World Bank.
  3. Krishna, Vijay & Serrano, Roberto, 1996. "Multilateral Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 63(1), pages 61-80, January.
  4. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
  5. Evenson, Robert E. & Pray, Carl E. & Rosegrant, Mark W., 1999. "Agricultural research and productivity growth in India:," Research reports 109, International Food Policy Research Institute (IFPRI).
  6. Z, Griliches & Jacques Mairesse, 1997. "Production Functions : The Search for Identification," Working Papers 97-30, Centre de Recherche en Economie et Statistique.
  7. Lensberg, Terje, 1988. "Stability and the Nash solution," Journal of Economic Theory, Elsevier, vol. 45(2), pages 330-341, August.
  8. James Levinsohn & Amil Petrin, 2000. "Estimating Production Functions Using Inputs to Control for Unobservables," NBER Working Papers 7819, National Bureau of Economic Research, Inc.
  9. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
  10. Siwan Anderson, 2011. "Caste as an Impediment to Trade," American Economic Journal: Applied Economics, American Economic Association, vol. 3(1), pages 239-63, January.
  11. Mukherji, Aditi, 2007. "The energy-irrigation nexus and its impact on groundwater markets in eastern Indo-Gangetic basin: Evidence from West Bengal, India," Energy Policy, Elsevier, vol. 35(12), pages 6413-6430, December.
  12. Meinzen-Dick, Ruth Suseela, 1996. "Groundwater markets in Pakistan: participation and productivity," Research reports 105, International Food Policy Research Institute (IFPRI).
  13. Srivastava, S.K. & Kumar, Ranjit & Singh, R.P., 2009. "Extent of Groundwater Extraction and Irrigation Efficiency on Farms under Different Water-market Regimes in Central Uttar Pradesh," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 22(1).
  14. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  15. Schoengold, Karina & Zilberman, David, 2007. "The Economics of Water, Irrigation, and Development," Handbook of Agricultural Economics, Elsevier.
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