The Institutional Economics of Water
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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.
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Chapter 3: Existing Literature: Approaches, Attempts, and Limitations

R. Maria Saleth and Ariel Dinar


To explain institutions, performance, and change in different cultural, social, economic, and political contexts, a variety of theories are used. Paralleling the diversity in theories, a variety of approaches are also used to develop the methodologies needed to evaluate institutions in theoretical and empirical settings. The relevance of these approaches and methodologies varies with the nature of the institutions, the level, scope, and focus of the analysis, and the evaluation context. To identify the institutional approach or approaches suitable for our purpose, a basic understanding of these approaches is essential. We attempt here an analytical overview of these approaches, including the institutional transaction cost approach. Against this overview, we also attempt a methodological review of the analytical and empirical literature dealing with institutions and their performance both in general and in water sector contexts. The review is intended to justify our study by identifying some serious gaps in the literature and to provide contrast to our approach and methodology by highlighting their points of departure from existing wisdom and tradition. INSTITUTIONAL APPROACHES: A STYLIZED COMPARISON Considering the subject matter and objectives of our study, its reliance on an institutional approach is natural and straightforward, but the approach itself has many strands and variants. A comparative overview of these variants can bring out their strengths and weaknesses. In terms of overall approach, the theoretical traditions in institutional economics can be grouped into five analytical categories (Landry 1996: 9). Table 3.1 shows how the approaches in each category differ in terms of...

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