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- Understanding the Direct and Indirect Effects of Water Policy for Better Policy Decision Making: An Application to Irrigation Water Management in Morocco
Understanding the Direct and Indirect Effects of Water Policy for Better Policy Decision Making: An Application to Irrigation Water Management in Morocco
Auteur :
Roe
Terry,
Dinar
Ariel,
Tsur
Yacov
...[et al.]
Année de Publication :
2006
Type : Actes de congrès / Séminaire / Atelier
Thème : Agriculture
Couverture :
Maroc
URL Article :
http://ageconsearch.umn.edu/bitstream/25679/1/cp060173.pdfURL Source :
http://ageconsearch.umn.edu 
Télécharger le document :
(134,34 kB) Understanding_the_Direct_and_Indirect_Effects_of_Water_Policy.pdfRésumé/Sommaire :
Irrigated agriculture is unique in its spatial dependency on land and water resources, its forward and backward linkages with the rest of the economy, it is almost always an international trade dependent sector, and its relative labor intensity in production suggests the potential for employing the poor and the potential for policy to ameliorate their living conditions. These differences with other sectors of the typical economy along with the difficulty of creating markets for water are arguably one of the main reasons that governments use a plethora of policy interventions such as complex water pricing mechanisms, water right assignments and development of water trading schemes (e.g., Johnson et al., 2002; Dinar and Saleth, 2005, Tsur et al., 2004; Tiwari and Dinar, 2002) to address water productivity and equity issues. Only recently have some countries also realized that as a trade dependent sector, foreign trade, fiscal and monetary policies also impact the marginal product (or shadow price) of irrigation water.
A confounding but seldom recognized feature of water policy is the policy errors that arise from collective action. Since the lack of water markets typical require some form of collective action to determine and administer the rules for water allocation to farmers, the mentioned uniqueness of irrigated agriculture implies that water policies often have both direct and indirect effects, the latter of which often work in the opposite direction to the former. The problem arises because the process of collective action, as Douglas North (1990) has noted, typically involves a process that tends to place emphasis on the direct effects of a policy outcome. In other words, the constraints of collective action tend to be such that this process is not capable of “solving” the simultaneous equations of a real economy as a decentralized market mechanism can be characterized as being able to perform. Often, the indirect effects, i.e., those effects that come about as other product and factor markets respond to the policy change, work in the opposite direction to the direct effect, and occasionally, these effects dominate the direct effect. The result can be viewed as failure of the collective action process to incorporate all of the information needed to make policy choices that lead to intended outcomes. Moreover, the sequence of policy reform is important when, as in most economies, there is more than one policy causing distortions. In this case, the sequence of reform that leads to a sequence of Pareto Superior outcomes becomes problematical. The collective action process tends fail in choosing the best sequence because the scope is typically narrowed to a sector so that distortions elsewhere in the economy are ignored. In this second best environment, the indirect effects of reform can easily dominate the direct effects.
The paper is organized as follows. We first sketch the Moroccan economy, provide a non-technical overview of the methodology and then proceed with the analysis.
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