The Institutional Economics of Water

The Institutional Economics of Water

A Cross-Country Analysis of Institutions and Performance

R. Maria Saleth and Ariel Dinar

This outstanding new book provides the most detailed and comprehensive evaluation of water reform and water sector performance from the perspectives of institutional economics and political economy.

Chapter 5: Analytical Framework and Empirical Models

R. Maria Saleth and Ariel Dinar

Subjects: economics and finance, environmental economics, institutional economics, environment, environmental economics, water

Extract

This chapter outlines the institutional decomposition and analysis (IDA) framework and identifies a set of empirically testable models that capture the major facets of the process of institution–performance interaction within the water sector. The specification of the analytical and empirical components of the IDA framework underlying our evaluation methodology can be done in four steps. First, the concepts of water sector, water institution, and water sector performance, as used in this study, are defined to set the broad contours of analysis. Second, water institution and water sector performance are conceptually decomposed to identify some of their major components and subcomponents (or aspects). Third, using this decomposition exercise and the institutional ecology principle, the analytical linkages among water institutional aspects are demonstrated, and the influences of exogenous factors affecting the process of institution–performance interaction within the water sector are illustrated. Finally, by defining variables to represent different institutional, performance, and exogenous aspects, the major layers of institution–performance interaction and their impact-transmission channels are translated into a set of empirically testable models. These models are used to evaluate the effects of factors both endogenous and exogenous to the process of interaction between water institution and water sector performance. CONCEPTUAL BASIS Let us begin by specifying the way in which the water sector, the water institution, and their performance are conceived and approached in our study. The specification of the conceptual basis of these three key entities is essential to delineate the scope and context of our analytical framework and...

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