Damming Trans-boundary Rivers: A Welfare Analysis of Conflict and Cooperation

Yuyu Zeng, Harold Houba, Ariel Dinar and Miroslav Marence
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Yuyu Zeng: VU University Amsterdam, The Netherlands
Harold Houba: VU University Amsterdam, The Netherlands
Ariel Dinar: University of California, Riverside, United States
Miroslav Marence: UNESCO-IHE Institute for Water Education, The Netherlands

No 16-090/II, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Dams are essential for water storage and hydropower generation, but change river flow patterns and endanger local environments. Dam projects may further exacerbate already existing problems in trans-boundary rivers. We consider three scenarios of institutional factors: (1) each country pursues its own interests, (2) efficient cooperation along the river and (3) partial cooperation among neighboring countries. We conduct cost-benefit analyses for these scenarios incorporating dam projects and their externalities. We demonstrate our approach for the Mekong River incorporating expert hydrological knowledge regarding installed hydropower capacity and dam location instead of the standard economic assumptions of such costs. Our results show that cooperation between Laos and Cambodia internalizes the negative impacts of dam construction in Laos on fishery in Cambodia, and Laos refrains from building some planned dams. Our results also hint that the 1995 Mekong agreement among Thailand, Laos, Cambodia and Vietnam is internally stable.

Keywords: Trans-boundary river basin management; Institutional factors; Dams; Externalities; Welfare analysis; Conflict and cooperation (search for similar items in EconPapers)
JEL-codes: C61 C70 D60 Q20 Q50 R10 (search for similar items in EconPapers)
Date: 2016-10-24
New Economics Papers: this item is included in nep-env, nep-ppm and nep-sea
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Citations: View citations in EconPapers (1)

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