TY - JOUR
T1 - Understanding the evolution and performance of water markets and allocation policy: A transaction costs analysis framework
AU - Garrick, Dustin
AU - Whitten, Stuart M
AU - Coggan, Anthea
PY - 2013
Y1 - 2013
N2 - Water markets and associated allocation policy reforms have struggled to achieve their intended goals in many water-stressed rivers, in part due to the institutional friction imposed by transition and transaction costs. This paper elaborates a transaction costs analysis framework to examine the evolution and performance of water markets and allocation policy reforms. This analysis rests on three pillars: i) a synthesis of three theoretical traditions of institutional analysis (Williamson, North, and Ostrom) often considered independently; ii) a framework to examine the types and interactions of transaction costs in market-based water allocation over time; and iii) an illustrative analysis of three large river basins - the Colorado, Columbia and Murray-Darling - with varying levels of success in market-based water policy reforms. The resulting framework accounts for water's complexity as an economic good. This framework and the case studies lead to the identification of several policy implications including the need for: a multiphase sequencing of reform, strategic investment in institutional transition costs, and institutional choices that preserve future flexibility to adjust water rights and diversion limits to manage social and environmental externalities.
AB - Water markets and associated allocation policy reforms have struggled to achieve their intended goals in many water-stressed rivers, in part due to the institutional friction imposed by transition and transaction costs. This paper elaborates a transaction costs analysis framework to examine the evolution and performance of water markets and allocation policy reforms. This analysis rests on three pillars: i) a synthesis of three theoretical traditions of institutional analysis (Williamson, North, and Ostrom) often considered independently; ii) a framework to examine the types and interactions of transaction costs in market-based water allocation over time; and iii) an illustrative analysis of three large river basins - the Colorado, Columbia and Murray-Darling - with varying levels of success in market-based water policy reforms. The resulting framework accounts for water's complexity as an economic good. This framework and the case studies lead to the identification of several policy implications including the need for: a multiphase sequencing of reform, strategic investment in institutional transition costs, and institutional choices that preserve future flexibility to adjust water rights and diversion limits to manage social and environmental externalities.
U2 - 10.1016/j.ecolecon.2012.12.010
DO - 10.1016/j.ecolecon.2012.12.010
M3 - Article
SN - 0921-8009
VL - 88
SP - 195
EP - 205
JO - Ecological Economics
JF - Ecological Economics
ER -