Nicholas Ryan and Anant Sudarshan
Common resources may be managed with inefficient policies for the sake of equity. We study how rationing the commons shapes the efficiency and equity of resource use in the context of agricultural groundwater use in Rajasthan, India. We find that rationing binds on input use, such that farmers, despite trivial prices for water extraction, use roughly the socially optimal amount of water on average. The rationing regime is still grossly inefficient, because it misallocates water across farmers, lowering productivity. Pigouvian reform would increase agricultural surplus by 12% of household income yet fall well short of a Pareto improvement over rationing.
Areas of Focus: Climate Change, Climate Economics
Definition
Climate Change
Climate change is an urgent global challenge. EPIC research is helping to assess its impacts, quantify its costs, and identify an efficient set of policies to reduce emissions and adapt...
Definition
Climate Economics
Climate change will affect every sector of the economy, both locally and globally. EPIC research is quantifying these effects to help guide policymakers, businesses, and individuals working to mitigate and...