Corruption vs. Efficiency in water allocation under uncertainty: Is There a trade-off?

Rupayan Pal and Dipti Ranjan Pati ()
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Dipti Ranjan Pati: Indira Gandhi Institute of Development Research

Indira Gandhi Institute of Development Research, Mumbai Working Papers from Indira Gandhi Institute of Development Research, Mumbai, India

Abstract: In the absence of a cooperative solution to the problem of rights over shared water, water allocation through third party intervention is most commonly used. This paper considers water allocation within a federal setup with the requisite legal institutions to enforce third party adjudication and tries to capturethe politically charged motivations that often guide such allocations. It compares two mechanisms generally used by central planners to allocate water between upstream and downstream regions, namelyfixed and proportional allocation rules. By considering a corrupt central planner, this paper models the underlying political manoeuvring that drives assignment of water rights. It is found that the politically pliable central planners choice of allocation rule depends on the expected state of nature. Interestingly,the corrupt central planners equilibrium choice of allocation rule turns out to be efficient, unless the problem of severe water scarcity is expected to occur.

Keywords: domestic water conflict; allocation rule; corruption; efficiency; third party adjudication (search for similar items in EconPapers)
JEL-codes: D73 D74 P14 Q34 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2020-09
New Economics Papers: this item is included in nep-gth
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Persistent link: https://EconPapers.repec.org/RePEc:ind:igiwpp:2020-029

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