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Transaction Costs and Institutional Performance in Market-Based Environmental Water Allocation

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  • Dustin Garrick
  • Bruce Aylward

Abstract

Policy reforms in the Columbia Basin spurred water rights reallocation for ecological recovery. Transaction costs have caused implementation to lag. This paper examines transaction costs and institutional performance in environmental water allocation. It evaluates spatial and temporal performance trends in watershed cases along three dimensions of adaptive efficiency: water recovery, transaction costs, and program budgets. Performance trends demonstrate intrastate variability and volatility over time due to the importance of local institutional capacity, which is uneven within states. Higher levels of water recovery may coincide with moderate to high transaction costs and program budgets, particularly during initial implementation efforts. This finding reflects investments in multilevel policy reform to strengthen enabling conditions and adapt to unintended consequences.

Suggested Citation

  • Dustin Garrick & Bruce Aylward, 2012. "Transaction Costs and Institutional Performance in Market-Based Environmental Water Allocation," Land Economics, University of Wisconsin Press, vol. 88(3), pages 536-560.
    • Handle: RePEc:uwp:landec:v:88:y:2012:iii:1:p:536-560
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    References listed on IDEAS

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    1. Bonnie G. Colby, 1990. "Transactions Costs and Efficiency in Western Water Allocation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(5), pages 1184-1192.
    2. Daniel W. Bromley, 1982. "Land and Water Problems: An Institutional Perspective," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 64(5), pages 834-844.
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    4. Carey, Janis & Sunding, David L. & Zilberman, David, 2002. "Transaction costs and trading behavior in an immature water market," Environment and Development Economics, Cambridge University Press, vol. 7(4), pages 733-750, October.
    5. Howitt, Richard E., 1994. "Empirical analysis of water market institutions: The 1991 California water market," Resource and Energy Economics, Elsevier, vol. 16(4), pages 357-371, November.
    6. Ray Challen, 2000. "Institutions, Transaction Costs and Environmental Policy," Books, Edward Elgar Publishing, number 1961.
    7. Garrick, D. & Siebentritt, M.A. & Aylward, B. & Bauer, C.J. & Purkey, A., 2009. "Water markets and freshwater ecosystem services: Policy reform and implementation in the Columbia and Murray-Darling Basins," Ecological Economics, Elsevier, vol. 69(2), pages 366-379, December.
    8. Cole,Daniel H., 2002. "Pollution and Property," Cambridge Books, Cambridge University Press, number 9780521001090, September.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Marshall, Graham R., 2013. "Transaction Costs, Collective Action And Adaptation In Managing Social-Ecological Systems," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152166, Australian Agricultural and Resource Economics Society.
    2. McCann, Laura, 2013. "Transaction costs and environmental policy design," Ecological Economics, Elsevier, vol. 88(C), pages 253-262.
    3. Georgina W. Njiraini & Djiby Racine Thiam & Anthea Coggan, 2017. "The Analysis of Transaction Costs in Water Policy Implementation in South Africa: Trends, Determinants and Economic Implications," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(01), pages 1-30, January.
    4. Dionisios Latinopoulos & Eftichios Sartzetakis, 2013. "Using tradable water permits in irrigated agriculture," Discussion Paper Series 2013_04, Department of Economics, University of Macedonia, revised Dec 2013.
    5. Potter, Nicholas A. & Hrozencik, R. Aaron & Wallander, Steven, 2023. "Irrigation Organizations: Water Inflows and Outflows," Economic Brief 338976, United States Department of Agriculture, Economic Research Service.
    6. Nijiraini, Georgina & Thiam, Djiby, 2015. "Estimating transaction costs associated with water policy implementation in South Africa," 2015 Conference, August 9-14, 2015, Milan, Italy 212585, International Association of Agricultural Economists.
    7. Loch, Adam & Wheeler, Sarah Ann & Settre, Claire, 2018. "Private Transaction Costs of Water Trade in the Murray–Darling Basin," Ecological Economics, Elsevier, vol. 146(C), pages 560-573.
    8. Fan, Shengyue & Yang, Jinfei & Liu, Wenwen & Wang, He, 2019. "Institutional Credibility Measurement Based on Structure of Transaction Costs: A Case Study of Ongniud Banner in the Inner Mongolia Autonomous Region," Ecological Economics, Elsevier, vol. 159(C), pages 212-225.
    9. Pannell, David J. & Roberts, Anna M. & Park, Geoff & Alexander, Jennifer, 2013. "Improving environmental decisions: A transaction-costs story," Ecological Economics, Elsevier, vol. 88(C), pages 244-252.
    10. Thiel, Andreas & Schleyer, Christian & Hinkel, Jochen & Schlüter, Maja & Hagedorn, Konrad & Bisaro, Sandy & Bobojonov, Ihtiyor & Hamidov, Ahmad, 2016. "Transferring Williamson's discriminating alignment to the analysis of environmental governance of social-ecological interdependence," Ecological Economics, Elsevier, vol. 128(C), pages 159-168.
    11. Garrick, Dustin & Whitten, Stuart M. & Coggan, Anthea, 2013. "Understanding the evolution and performance of water markets and allocation policy: A transaction costs analysis framework," Ecological Economics, Elsevier, vol. 88(C), pages 195-205.
    12. Carlos Mario Gómez Gómez & C. D. Pérez-Blanco & David Adamson & Adam Loch, 2018. "Managing Water Scarcity at a River Basin Scale with Economic Instruments," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1-31, January.
    13. Colby, Bonnie, 2020. "Acquiring environmental flows: ecological economics of policy development in western U.S," Ecological Economics, Elsevier, vol. 173(C).
    14. Marshall, Graham R., 2013. "Transaction costs, collective action and adaptation in managing complex social–ecological systems," Ecological Economics, Elsevier, vol. 88(C), pages 185-194.

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    More about this item

    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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