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 7: Institutional Changes in the Water Sector: A Cross-Country Review

R. Maria Saleth and Ariel Dinar


Institutional arrangements governing the water sector have been undergoing remarkable changes worldwide. Although the extent and depth of these changes vary by country-specific economic, political, and resource realities, they evince noteworthy commonalities. What are the nature and direction of these institutional changes? What prompts and sustains such changes? How pronounced are the common trends and patterns? Are there ‘best practice’ cases? How relevant are they for universal application? This chapter is intended to provide some answers to these and related questions based on a review of institutional changes in our sample countries. Given the scope of our study and purpose of this chapter, the cross-country review reported here is brief, focusing on key features and thrusts of reforms observed up to the survey period. Though neither complete nor comprehensive, this review is significant on four counts. First, since it highlights the relative influence of exogenous factors (e.g., socioeconomic, demographic, political, and resource-related aspects), the review provides cross-country anecdotal evidence for the effects of the overall institutional environment both on institution–performance interaction (Figure 5.2) and on the perception of sectoral performance (Model C). Second, since the review is performed within an analytical framework rooted in institutional transaction cost theory, the occurrence and depth of reforms across countries can be understood and explained as a direct outcome of a transaction cost–opportunity cost calculus. Third, despite its brevity, the review can place sample countries in the four stages of our perception-based conception of institutional change. And, finally, the review provides a...

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