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Efficiency and equity in groundwater markets: the case of Madhya Pradesh, India

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  • KAJISA, KEI
  • SAKURAI, TAKESHI

Abstract

This paper examines efficiency and equity in groundwater markets with special attention to output sharing contracts and to the bargaining relationships between sellers and buyers, using household level data from Madhya Pradesh, India. Regression results find no significant inefficiency on farms managed by output sharing buyers, presumably because optimal input intensities are achieved through effective monitoring and contract adherence mechanisms embedded in long-term and intensive personal relationships between sellers and buyers. As for equity, the finding is that, while output sharing buyers pay higher water prices, the rate of premiums is merely 5 percentage points higher than the informal interest rate that they would have had to carry under other types of groundwater contracts. The results also show that buyers who have access to alternative water sellers pay lower water prices. These findings indicate that if the imperfection of credit and contingent markets in rural areas are taken into account, informal groundwater markets work fairly well in agrarian communities if monitoring and contract adherence mechanisms are embedded and a sufficient number of potential sellers are available.

Suggested Citation

  • Kajisa, Kei & Sakurai, Takeshi, 2005. "Efficiency and equity in groundwater markets: the case of Madhya Pradesh, India," Environment and Development Economics, Cambridge University Press, vol. 10(6), pages 801-819, December.
    • Handle: RePEc:cup:endeec:v:10:y:2005:i:06:p:801-819_00
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    Cited by:

    1. Michler, Jeffrey D. & Wu, Steven Y., 2020. "Governance and contract choice: Theory and evidence from groundwater irrigation markets," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 129-147.
    2. Michler, Jeffrey D. & Balagtas, Joseph Valdes, 2013. "The Determinants of Rice Storage: Evidence from Rice Farmers in Bangladesh," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150267, Agricultural and Applied Economics Association.
    3. Yashodha, Y., 2018. "Bargaining and Contract Choice: Evidence from Informal Groundwater Contracts," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 276035, International Association of Agricultural Economists.
    4. Manjunatha, A.V. & Anik, Asif Reza & Speelman, S. & Nuppenau, E.A., 2014. "Farmers’ Participation in Informal Groundwater Market in Hard Rock Areas of Peninsular India," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 27(Conferenc).
    5. Mottaleb, Khondoker A. & Krupnik, Timothy J. & Keil, Alwin & Erenstein, Olaf, 2019. "Understanding clients, providers and the institutional dimensions of irrigation services in developing countries: A study of water markets in Bangladesh," Agricultural Water Management, Elsevier, vol. 222(C), pages 242-253.
    6. Achiransu Acharyya & Madhusudan Ghosh & Rabindra N. Bhattacharya, 2018. "Groundwater Market in West Bengal, India: Does it Display Monopoly Power?," Studies in Microeconomics, , vol. 6(1-2), pages 105-129, June.
    7. Bajaj, Akshi & Singh, S.P. & Nayak, Diptimayee, 2022. "Impact of water markets on equity and efficiency in irrigation water use: A systematic review and meta-analysis," Agricultural Water Management, Elsevier, vol. 259(C).
    8. Jitu Tamuli & Mrinal Kanti Dutta, 2015. "What Determines Farmers’ Decision to Buy Irrigation Water in Water Abundant Regions? A Study of Groundwater Markets in Assam in Eastern India," Working Papers 2015.03, International Network for Economic Research - INFER.
    9. Michler, Jeffrey D. & Wu, Steven, 2013. "Contracting for Groundwater Irrigation:A Principal-Agent Based Approach to Determining Contract Effectiveness," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149437, Agricultural and Applied Economics Association.

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