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Regulating groundwater use in developing countries: a feasible instrument for public intervention

  • Lars Gårn Hansen


    (Institute of Food and Resource Economics, University of Copenhagen)

  • Frank Jensen


    (Institute of Food and Resource Economics, University of Copenhagen)

  • Eirik S. Amundsen


    (Institute of Food and Resource Economics, University of Copenhagen)

In many developing countries, groundwater is a common pool resource which is potentially subject to the tragedy of the commons if water extraction is not adequately regulated. However, in these countries, the regulatory infrastructure is often too weak to allow detailed monitoring of individual groundwater extraction. For this reason, classical public intervention instruments, such as consumption fees or tradable quotas, are infeasible. Here we present a theoretical foundation for a new public regulatory instrument that can potentially generate the same efficiency inducing incentives as fees and tradable quotas, but without their information and monitoring requirements. The instrument we propose is a tax based on aggregate extraction, rather than individual extraction measures.

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Paper provided by University of Copenhagen, Department of Food and Resource Economics in its series IFRO Working Paper with number 2011/3.

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Length: 22 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:foi:wpaper:2011_3
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  1. Hellegers, Petra & Zilberman, David & van Ierland, Ekko, 2001. "Dynamics of agricultural groundwater extraction," Ecological Economics, Elsevier, vol. 37(2), pages 303-311, May.
  2. repec:cup:cbooks:9780521311748 is not listed on IDEAS
  3. Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 87-98, March.
  4. Jensen, Frank & Vestergaard, Niels, 2002. "Moral hazard problems in fisheries regulation: the case of illegal landings and discard," Resource and Energy Economics, Elsevier, vol. 24(4), pages 281-299, November.
  5. Ambec, Stefan & Sprumont, Yves, 2000. "Sharing a River," Cahiers de recherche 0006, GREEN.
  6. Lars Hansen, 1998. "A Damage Based Tax Mechanism for Regulation of Non-Point Emissions," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 12(1), pages 99-112, July.
  7. Scanes, Colin & Miranowski, John, 2004. "Perspectives in World Food and Agriculture 2004," Staff General Research Papers 12372, Iowa State University, Department of Economics.
  8. Burness, H Stuart & Quirk, James P, 1979. "Appropriative Water Rights and the Efficient Allocation of Resources," American Economic Review, American Economic Association, vol. 69(1), pages 25-37, March.
  9. Horan, Richard D. & Shortle, James S. & Abler, David G., 1998. "Ambient Taxes When Polluters Have Multiple Choices," Journal of Environmental Economics and Management, Elsevier, vol. 36(2), pages 186-199, September.
  10. Xepapadeas, A. P., 1991. "Environmental policy under imperfect information: Incentives and moral hazard," Journal of Environmental Economics and Management, Elsevier, vol. 20(2), pages 113-126, March.
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