Decentralized vs. Centralized Water Pollution Cleanup in the Ganges in a Model with Three Cities

We think of the cleanup of water pollution in the Ganges river in India as a local public good and ask whether this cleanup ought to be decentralized or centralized. We depart from the existing literature on this subject in two important ways. First, we allow the heterogeneous spillovers from cleaning up water pollution to be positive or negative. Second, we focus on water pollution cleanup in three cities---Kanpur, Prayagraj, Varanasi---through which the Ganges flows. Our model sheds light on two broad issues. First, we characterize efficient water pollution cleanup in the three cities, we describe how much water pollution is cleaned up under decentralization, we describe the set of cleanup amounts under decentralization, and we discuss why pollution cleanup under decentralization is unlikely to be efficient. Second, we focus on centralization. We derive the tax paid by the inhabitants of the three cities for pollution cleanup, the benefit to a city inhabitant from water pollution cleanup, how majority voting determines how much pollution is cleaned up when the spillovers from cleanup are uniform, and finally, we compare the amounts of pollution cleaned up with majority voting with the efficient pollution cleanup amounts.