Understanding the evolution and performance of water markets and allocation policy: A transaction costs analysis framework
Water markets and associated allocation policy reforms have struggled to achieve their intended goals in many water-stressed rivers, in part due to the institutional friction imposed by transition and transaction costs. This paper elaborates a transaction costs analysis framework to examine the evolution and performance of water markets and allocation policy reforms. This analysis rests on three pillars: i) a synthesis of three theoretical traditions of institutional analysis (Williamson, North, and Ostrom) often considered independently; ii) a framework to examine the types and interactions of transaction costs in market-based water allocation over time; and iii) an illustrative analysis of three large river basins – the Colorado, Columbia and Murray–Darling – with varying levels of success in market-based water policy reforms. The resulting framework accounts for water's complexity as an economic good. This framework and the case studies lead to the identification of several policy implications including the need for: a multiphase sequencing of reform, strategic investment in institutional transition costs, and institutional choices that preserve future flexibility to adjust water rights and diversion limits to manage social and environmental externalities.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dustin Garrick & Bruce Aylward, 2012. "Transaction Costs and Institutional Performance in Market-Based Environmental Water Allocation," Land Economics, University of Wisconsin Press, vol. 88(3), pages 536-560.
- Marshall, Graham R., 2013. "Transaction costs, collective action and adaptation in managing complex social–ecological systems," Ecological Economics, Elsevier, vol. 88(C), pages 185-194.
- Gary D. Libecap, 2009. "Chinatown Revisited: Owens Valley and Los Angeles--Bargaining Costs and Fairness Perceptions of the First Major Water Rights Exchange," Journal of Law, Economics and Organization, Oxford University Press, vol. 25(2), pages 311-338, October.
- Coggan, Anthea & Buitelaar, Edwin & Whitten, Stuart & Bennett, Jeff, 2013. "Factors that influence transaction costs in development offsets: Who bears what and why?," Ecological Economics, Elsevier, vol. 88(C), pages 222-231.
- Saleth, R. Maria & Dinar, Ariel, 1999. "Water challenge and institutional response (a cross-country perspective)," Policy Research Working Paper Series 2045, The World Bank.
- McCann, Laura & Colby, Bonnie & Easter, K. William & Kasterine, Alexander & Kuperan, K.V., 2005. "Transaction cost measurement for evaluating environmental policies," Ecological Economics, Elsevier, vol. 52(4), pages 527-542, March.
- McCann, Laura, 2013. "Transaction costs and environmental policy design," Ecological Economics, Elsevier, vol. 88(C), pages 253-262.
- Gary D. Libecap, 2011. "Institutional Path Dependence in Climate Adaptation: Coman's "Some Unsettled Problems of Irrigation"," American Economic Review, American Economic Association, vol. 101(1), pages 64-80, February.
- M. D. Young & J. C. McColl, 2003. "Robust Reform: The Case for a New Water Entitlement System for Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(2), pages 225-234.
- North, Douglass C., 1993.
"Economic Performance through Time,"
Nobel Prize in Economics documents
1993-2, Nobel Prize Committee.
- Howitt, Richard E., 1994. "Empirical analysis of water market institutions: The 1991 California water market," Resource and Energy Economics, Elsevier, vol. 16(4), pages 357-371, November.
- Douglass C. North, 2005.
"Introduction to Understanding the Process of Economic Change
[Understanding the Process of Economic Change]," Introductory Chapters, Princeton University Press.
- Michael McKee & Kenneth Baker, 2000. "Increasingly Contested Property Rights and Trading in Environmental Amenities," Land Economics, University of Wisconsin Press, vol. 76(3), pages 333-344.
- Hearne, Robert R. & Easter, K. William, 1997.
"The economic and financial gains from water markets in Chile,"
Agricultural Economics of Agricultural Economists,
International Association of Agricultural Economists, vol. 15(3), January.
- Hearne, Robert R. & William Easter, K., 1997. "The economic and financial gains from water markets in Chile," Agricultural Economics, Blackwell, vol. 15(3), pages 187-199, January.
- Bauer, Carl J., 1997. "Bringing water markets down to earth: The political economy of water rights in Chile, 1976-1995," World Development, Elsevier, vol. 25(5), pages 639-656, May.
- Jaffe, Adam B. & Newell, Richard G. & Stavins, Robert N., 2003. "Chapter 11 Technological change and the environment," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 11, pages 461-516 Elsevier.
- Crase, Lin & O'Keefe, Sue & Dollery, Brian, 2013. "Talk is cheap, or is it? The cost of consulting about uncertain reallocation of water in the Murray–Darling Basin, Australia," Ecological Economics, Elsevier, vol. 88(C), pages 206-213.
- Edella Schlager & Elinor Ostrom, 1992. "Property-Rights Regimes and Natural Resources: A Conceptual Analysis," Land Economics, University of Wisconsin Press, vol. 68(3), pages 249-262.
When requesting a correction, please mention this item's handle: RePEc:eee:ecolec:v:88:y:2013:i:c:p:195-205. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.