Working Paper: NBER ID: w27473
Authors: Nicholas Ryan; Anant Sudarshan
Abstract: Common resources may be managed with inefficient policies for the sake of equity. We study how rationing the commons shapes the efficiency and equity of resource use, in the context of agricultural groundwater use in Rajasthan, India. We find that rationing binds on input use, such that farmers, despite trivial prices for water extraction, use roughly the socially optimal amount of water on average. The rationing regime is still grossly inefficient, because it misallocates water across farmers, lowering productivity. Pigouvian reform would increase agricultural surplus by 12% of household income, yet fall well short of a Pareto improvement over rationing.
Keywords: Groundwater; Rationing; Agricultural Economics
JEL Codes: D24; O13; Q15; Q56
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| rationing regime (D45) | constrains water use among farmers (Q25) |
| rationing (D45) | significant inefficiencies due to misallocation of water (Q25) |
| productive farmers constrained by rationing (D45) | inefficiencies in water allocation (D61) |
| unproductive farmers over-extracting water (Q25) | inefficiencies in water allocation (D61) |
| Pigouvian pricing regime (H23) | increase agricultural surplus (Q11) |
| Pigouvian pricing regime (H23) | not result in Pareto improvement (D69) |