Document Type

Article

Publication Date

3-2012

Publication Title

Environmental and Resource Economics

Abstract

Increasingly, central governments approach contentious natural resource allocation problems by devolving partial decision-making responsibility to local stakeholders. This paper conceptualizes devolution as a three-stage process and uses a simulation model calibrated to real-world conditions to analyze devolution in Spain’s Upper Guadiana Basin. The Spanish national government has proposed spending over a billion euros to reverse a 30 year decline in groundwater levels. We investigate how the government can most effectively allocate this money to improve water levels by utilizing its power to set the structure of a local negotiation process. Using a numerical Nash model of local bargaining, we find that if the national government creates appropriate incentives, local bargaining can produce water stabilization. The actual water levels that will emerge are highly dependent on the central government’s decisions about the budget available to local stakeholders and the default policy, which will be influenced by the relative value the government places on various financial and environmental outcomes. Our paper concludes by determining the relationship between these relative valuations and the government’s preferences over water levels.

Keywords

Bargaining theory, Devolution, Water policy, Political economy

Volume

51

Issue

3

First Page

453

Last Page

470

DOI

doi.org/10.1007/s10640-011-9507-5

Rights

©2012 the authors

Comments

Peer reviewed accepted manuscript.

Included in

Economics Commons

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