Interactions between economic policies and institutions in water allocation and use: Theory and evidence from a Philippine watershed
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This chapter begins by presenting such a highly simplified model (section 1) wherein what is distinguished are only the decisions of two agents, in upstream and downstream locations, who compete for a limited supply of surface water in each period. There is no attempt to provide a complete accounting for the complexities of such situations; rather, the ways that bring the role of economic incentives into sharp focus are simplified. In particular, market and non-market allocations of water are compared. Non-market allocations are further subdivided into those arising from a complete absence of property rights and those due to the assertion of rights by the state.
A particular Goal in this chapter is to uncover the likely water allocation effects of government policies that are not necessarily aimed at watershed management. Important examples of these in the Philippines include trade and agricultural pricing policies. These have the potential to alter incentives to use land and water in particular ways. Section 2 explores such policies in the Philippines. Subsequently, in section 3, a brief illustration by reference to data, analysis and related experience from one Philippine watershed is provided. This case study is useful not merely because the site is representative of many upland Philippine areas, but also because for almost a decade, it has been the focus of intensive data-gathering, analysis and various development initiatives at farm, community, project and local government levels.