CPR Provision Close to the Social Optimum Despite Unequal Appropriation: Experimental Evidence from Pakistan

Abstract

"Irrigation systems are a special case of common-pool resources (CPR) where some users have preferential access to resource exploitation due to their advantageous location. This potentially aggravates collective-action challenges associated with common-pool resources such as the underprovision of necessary infrastructure as a result of unequal appropriation of water resources. From the point of view of standard economic theory, this inherent asymmetry results in more complexity which decreases the chances of successful self-governance. In contrast to theory, empirical evidence from around the world challenges such pessimism towards decentralized governance of irrigation system. Many communities have devised various institutions to overcome these problems. We employ field experiments based on the experimental design of Janssen et al. (2011) to analyse the effectiveness of different institutional settings (communication, traditional authority and external sanctions) in establishing and maintaining a stable and fair CPR management system under conditions of asymmetric access to the resource base. The experiments were carried out in eight villages in Punjab/Pakistan with 176 farmers. In the experiments, Punjabi farmers managed to provide the CPR at a level close to the social optimum even without communication or enforcement opportunities. The equal investment in water infrastructure seems to be a strong intrinsic social norm even though those in disadvantageous positions (tail-users) earn less than those who have preferential access (head-users). Introducing institutions as treatments, disadvantaged players (tail-users) of groups being allowed to either directly communicate or to call on a traditional authority further enhanced average earnings. In contrast, groups having the option to fine fellow players did not improve their performance and therefore had significantly lower average earnings. Only traditional authority groups managed to improve the overall group welfare with the introduction of the institution."