CFDP 2239

Rationing the Commons

Author(s): 

Publication Date: June 2020

Pages: 83

Abstract: 

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.

Keywords: Common resources, Agricultural productivity, Misallocation, Sustainable development

JEL Classification Codes: D24, Q15, Q56, O13

JEL Classification Codes: D24Q15Q56O13