IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/2628.html
   My bibliography  Save this paper

Monopoly power and distribution in fragmented markets : the case of groundwater

Author

Listed:
  • Jacoby, Hanan G.*Murgai, Rinku*Rehman, Saeed Ur

Abstract

Using data from Pakistan's Punjab, the authors examine monopoly power in the market for groundwater - irrigation water extracted using private tubewells - a market characterized by barriers to entry and spatial fragmentation. Simple theory predicts that tubewell owners should price-discriminate in favor of their own share tenants. And this analysis of individual groundwater transactions over an 18-month period confirms such price discrimination. And among those studied, tubewell owners and their tenants use considerably more groundwater on their plots than do other farmers. The authors also provide evidence that monopoly pricing of groundwater leads to compensating - albeit small - reallocations of canal water, which farmers exchange in a separate informal market. Despite the substantial misallocation of groundwater, a welfare analysis show that monopoly pricing has limited effects on equity and efficiency. In the long run, a policy aimed at eliminating monopoly pricing would do little to help the poorest farmers.

Suggested Citation

  • 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.
  • Handle: RePEc:wbk:wbrwps:2628
    as

    Download full text from publisher

    File URL: http://documents.worldbank.org/curated/en/962741468759556335/pdf/multi0page.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Brian D. Wright & Kenneth M. Kletzer, 2000. "Sovereign Debt as Intertemporal Barter," American Economic Review, American Economic Association, vol. 90(3), pages 621-639, June.
    2. repec:wuk:andedp:9705 is not listed on IDEAS
    3. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
    4. Tushaar Shah, & Intizar Hussain & Saeed ur Rehman, 2000. "Irrigation Management in Pakistan and India: Comparing Notes on Institutions and Policies," IWMI Working Papers H027088, International Water Management Institute.
    5. Meinzen-Dick, Ruth Suseela, 1996. "Groundwater markets in Pakistan: participation and productivity," Research reports 105, International Food Policy Research Institute (IFPRI).
    6. William Hallagan, 1978. "Self-Selection by Contractual Choice and the Theory of Sharecropping," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 344-354, Autumn.
    7. Basu, Kaushik & Bell, Clive, 1991. "Fragmented duopoly : Theory and applications to backward agriculture," Journal of Development Economics, Elsevier, vol. 36(2), pages 145-165, October.
    8. Abhijit Banerjee & Dilip Mookherjee & Kaivan Munshi & Debraj Ray, 2001. "Inequality, Control Rights, and Rent Seeking: Sugar Cooperatives in Maharashtra," Journal of Political Economy, University of Chicago Press, vol. 109(1), pages 138-190, February.
    9. Fafchamps, Marcel & Pender, John, 1997. "Precautionary Saving, Credit Constraints, and Irreversible Investment: Theory and Evidence from Semiarid India," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(2), pages 180-194, April.
    10. Basu, Kaushik, 1987. "Disneyland monopoly, interlinkage and usurious interest rates," Journal of Public Economics, Elsevier, vol. 34(1), pages 1-17, October.
    11. Coate, Stephen & Ravallion, Martin, 1993. "Reciprocity without commitment : Characterization and performance of informal insurance arrangements," Journal of Development Economics, Elsevier, vol. 40(1), pages 1-24, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Banerji, A. & Meenakshi, J.V. & Khanna, Gauri, 2012. "Social contracts, markets and efficiency: Groundwater irrigation in North India," Journal of Development Economics, Elsevier, vol. 98(2), pages 228-237.
    2. Gine,Xavier & Jacoby,Hanan G. & Gine,Xavier & Jacoby,Hanan G., 2016. "Markets, contracts, and uncertainty in a groundwater economy," Policy Research Working Paper Series 7694, The World Bank.
    3. 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.
    4. Gauri Khanna, 2006. "Technical Efficiency in Production and Resource Use in Sugar Cane: A Stochastic Frontier Production Function Analysis," IHEID Working Papers 15-2006, Economics Section, The Graduate Institute of International Studies.
    5. Sheila M. Olmstead, 2010. "The Economics of Managing Scarce Water Resources," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(2), pages 179-198, Summer.
    6. Tao Chen & Gautam Tripathi, 2014. "A simple consistent test of conditional symmetry in symmetrically trimmed tobit models," CREA Discussion Paper Series 14-04, Center for Research in Economic Analysis, University of Luxembourg.
    7. A.Banerji & Gauri Khanna & J.V. Meenakshi, 2006. "Markets, Institutions And Efficiency Groundwater Irrigation In North India," Working papers 152, Centre for Development Economics, Delhi School of Economics.
    8. Pandey, Rita, 2014. "Groundwater Irrigation in Punjab: Some Issues and Way Forward," Working Papers 14/140, National Institute of Public Finance and Policy.
    9. A. Banerji & J. V. Meenakshi & Gauri Khanna, "undated". "Groundwater Irrigation in North India: Institutions and Markets," Working papers 17, The South Asian Network for Development and Environmental Economics.
    10. Ansink, Erik & Houba, Harold, 2012. "Market power in water markets," Journal of Environmental Economics and Management, Elsevier, vol. 64(2), pages 237-252.
    11. Kristiana Hansen & Jonathan Kaplan & Stephan Kroll, 2014. "Valuing Options in Water Markets: A Laboratory Investigation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(1), pages 59-80, January.
    12. Watto, Muhammad, 2013. "Measuring Groundwater Irrigation Efficiency in Pakistan: A DEA Approach Using the Sub-vector and Slack-based Models," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152204, Australian Agricultural and Resource Economics Society.
    13. Siwan Anderson, 2011. "Caste as an Impediment to Trade," American Economic Journal: Applied Economics, American Economic Association, vol. 3(1), pages 239-263, January.
    14. Jitu Tamuli & Mrinal Kanti Dutta, 2015. "What Determines Farmers’ Decision to Buy Irrigation Water in Water Abundant Regions? A Study of Groundwater Markets in Assam in Eastern India," Working Papers 2015.03, International Network for Economic Research - INFER.
    15. Muhammad Arif Watto & Amin W. Mugera, 2014. "Measuring Production and Irrigation Efficiencies of Rice Farms: Evidence from the Punjab Province, Pakistan," Asian Economic Journal, East Asian Economic Association, vol. 28(3), pages 301-322, September.
    16. Zhang, Lijuan & Wang, Jinxia & Huang, Jikun & Rozelle, Scott, 2008. "Development of Groundwater Markets in China: A Glimpse into Progress to Date," World Development, Elsevier, vol. 36(4), pages 706-726, April.
    17. Jean-Paul Azam & Jean-Daniel Rinaud, 2000. "Encroached Entitlements: Corruption and Appropriation of Irrigation Water in Southern Pun jab Pakistan)," Development Working Papers 144, Centro Studi Luca d'Agliano, University of Milano.
    18. Mohamed Salah Matoussi & Neji Saidi, 2014. "Financial Constraints Risk Aversion and Sharecropping in Rainfed Agriculture: Application to North West Tunisia," Working Papers 880, Economic Research Forum, revised Nov 2014.
    19. Watto, Muhammad Arif & Mugera, Amin William, 2013. "Measuring Groundwater Irrigation Efficiency in Pakistan: A DEA Approach Using the Sub-vector and Slack-based Models," Working Papers 144943, University of Western Australia, School of Agricultural and Resource Economics.
    20. Chen, Tao & Tripathi, Gautam, 2017. "A simple consistent test of conditional symmetry in symmetrically trimmed tobit models," Journal of Econometrics, Elsevier, vol. 198(1), pages 29-40.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:2628. 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: (Roula I. Yazigi). General contact details of provider: http://edirc.repec.org/data/dvewbus.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.