Published on Let's Talk Development

Learning from previous research: How to design international and local institutions to better manage water resources

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Arne Hoel / World Bank Arne Hoel / World Bank

This blog entry is part of a series that highlights insights from research for development policies and practices, supported by the Knowledge for Change Program (KCP). 

More than 2.2 billion people live their lives without access to safe water.  Since 1993, the UN designates March 22 as the World Water Day to help raise awareness and make the sometimes-invisible resources that many take for granted more visible. KCP has supported research and data projects on a myriad of topics closely related to water issues, including water pricing, irrigation management, water governance, and demand for clean water among others.  

Today, we’ll highlight three pieces of KCP-financed research that focus on the public good nature of water resources, and the important role that international and local institutions play in the management of this precious natural resource .  

Do Countries Free Ride in Dam Constructions for International Waters?  

International cooperation for the management of global public goods that cross geographical boundaries often suffers from free rider problem – it represents an inefficient distribution of resources when some benefit from more than their fair share of the good of a communal nature.  The construction of dams in rivers shared by more than one country poses such a dilemma. A KCP-funded paper in 2014 examined whether countries would consider the welfare of other nations that share water resources when they make water development decisions. The results suggested that countries would engage in more intensive dam construction in areas that are upstream of international borders than other areas, which squarely pointed to the free ride problem where countries would exploit shared water resources. This meant that there may be sub-optimality in dam locations, and the ability to export some costs of dams may incentivize their construction in international river basins.  

How Best to Negotiate International Water Treaties?  

Similarly, climate change will most likely cause international river basins to face higher hydrological variability, which may lead to greater political tensions or inter-state conflicts. Countries nowadays rely on international institutions, such as water treaties, to govern and manage the interlinked challenges related to water variability, climate change, economic development, and political tensions in international rivers. Nonetheless, existing run-off estimation methodologies are insufficient to predict future hydrologic variation, which would mis-represent supply parameters speculated by treaties. A KCP-financed paper in 2012 developed a basin economic model to fill this knowledge gap. By applying the model in estimating monthly runoff in near real time in two international river basins, Zambezi and Mekong, the authors demonstrated that it could predict natural runoff with a greater accuracy and level of significance, and thus reduce the uncertainty inherent in developing international water treaties and better foster international cooperation with countries that share transboundary natural assets. 

Does Decentralization Affect Corruption in Local Water Management?  

The impact of decentralization on corruption has been difficult to assess as there are few natural experiments in decentralization for which corruption can be objectively measured. A KCP-funded paper in 2021 analyzed the decentralization efforts in the world’s largest canal irrigation system: Pakistan’s Indus basin watershed. The paper found evidence that the shift in irrigation management authority from the central bureaucracy to local farmers’ organizations led to an increase in water theft, especially along channels where large landowners are concentrated. Hence, the research highlights the importance of designing institutions that mitigate opportunities for elite capture of public resources, as well as the need to strengthen the accountability of institutions at the local level. 

The authors would like to acknowledge contributions from the following projects under the guidance of task team leads (TTLs) and researchers: Damming the Commons An Empirical Analysis of International Cooperation and Conflict in Dam Location (Michael A Toman), Decentralizing Corruption? Irrigation Reform in Pakistan’s Indus Basin (Hanan Jacoby) and Assessing Economic and Political Impacts of Hydrological Variability on Treaties Case Studies on the Zambezi and Mekong Basins (Michael A Toman) 

About the blog series:The Knowledge for Change Program (KCP) has launched a blog series to retrospectively highlight a selection of research projects conducted over the past 20 years, many of which still remain highly relevant and offer great lessons for development policies and practices today. Managed by the Development Economics Vice Presidency of the World Bank (DEC), the KCP promotes evidence-based policy making through research, data and analytics. To celebrate the KCP’s fourth phase launched in November 2020, this blog series will look into the wealth of knowledge researchers have generated in KCP’s previous phases, distill lessons learned, and inspire discussions on future research directions. 


Kerina Wang

Senior Program Officer, Development Economics and Chief Economist

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