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 8: Institution–Performance Linkages: Evidence and Evaluation

R. Maria Saleth and Ariel Dinar

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


Chapter 7 provides anecdotal and descriptive evidence for some of the more explicit linkages between institutional aspects and their performance implications as observed in one or more sample countries. Although the more subtle linkages evident in the process of institution–performance interaction are not covered, Chapter 7 provides ample theoretical reasoning and observational evidence for the relative role of endogenous and exogenous factors in water institutional reforms in the light of transaction cost and political economy considerations. This evidence and the discussion of country-specific and cross-country trends and patterns in water challenges and institutional responses provide the necessary background for the interpretation of results and analysis presented here. The present chapter is the most critical part of our study, as it brings together the theoretical issues and observational evidence bearing upon the empirical results so as to highlight their strategic value and policy implications. EMPIRICAL EVALUATION: APPROACH AND FRAMEWORK For a better analysis of the results and appreciation of their implications, we must first clarify our approach and framework within which the three sets of models specified in Chapter 5 are empirically estimated and evaluated. The approach allows us to identify the estimation techniques and procedures that are appropriate for different models, whereas the evaluation framework enables us to indicate the way the models are estimated and their results are presented and evaluated. We have adopted two approaches for the estimation of the three models. These are the single equation approach involving the Ordinary Least Squares (OLS) technique and the...

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