LINKING THE UNLINKED: TRANSBOUNDARY WATER-SHARING UNDER WATER-FOR-LEVERAGE NEGOTIATIONS

Shaikh Eskander (), Thorsten Janus and Edward Barbier

No 235650, 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts from Agricultural and Applied Economics Association

Abstract: We develop a game-theoretic framework of negotiation over sharing of trans-boundary resources between neighboring countries. The downstream country offers a non-water “leverage” good in exchange for water access and makes a take-it-or-leave-it offer to the upstream country. The downstream country can further invest in water provision before the negotiations. We compare three types of outcomes: the first-best outcomes where an “ex-ante social planner” choses both the water investment and the water and leverage goods exchanged in the negotiations; the outcome when an “ex-post social planner” only enters at the negotiation stage; and the outcome of bilateral negotiations. We argue that all three cases can be empirically realistic; show that the outcome with the ex-post social planner can distort the downstream country’s investment incentive; and that the bilateral negotiation outcome can lead to water investment either below or above the efficient/ex-ante planner’s preferred choice.

Keywords: Environmental Economics and Policy; Political Economy; Resource/Energy Economics and Policy; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 16
Date: 2016
New Economics Papers: this item is included in nep-env
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea16:235650

DOI: 10.22004/ag.econ.235650

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