The Interstate River Compact as a Water Allocation Mechanism: Efficiency Aspects

Lynne Lewis, Charles W. Howe and James Shope

American Journal of Agricultural Economics, 2000, vol. 82, issue 4, 1006-1015

Abstract: Interstate river compacts are widely used to allocate water among riparian states. Twenty-one compacts are currently in force in the western United States, and these compacts are mostly of two types: those that allocate a fixed amount or flow of water to individual states; and those that allocate percentages of available water to the riparian states. This study compares the performance of the two resulting allocations with that resulting from basin-wide optimization without compact constraints. While widely varying hydrologic and economic characteristics of river basins create a large set of possible outcomes, a range of stylized case studies indicates that percentage compacts are likely to generate greater net benefits and to result in more equitable risk-sharing than fixed compacts under many circumstances. In light of recent compact negotiations in the southeastern United States, it is recommended that efficiency analyses under present and future conditions be made a part of all compact negotiations. Copyright 2000, Oxford University Press.

Date: 2000
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