Impact of water markets on equity and efficiency in irrigation water use: A systematic review and meta-analysis

Abstract

The water markets as an institution for water demand and supply management has been extensively documented both theoretically and empirically. The application of successful water market models of developed economies in developing economies has also gained much attention of the researchers and policy makers globally. However, the studies in different regions have stated a number of arguments both in favour and against the water markets as an economic instrument for water use efficiency and equity, particularly in the irrigation sector. The present study conducts a systematic review and meta-analysis for identifying different ways in which the water markets impact irrigation water-use in different regions and analyse the various factors of water markets that impact irrigation water-use efficiency and equity. The results show that all the studies that confirm the trade-off between water-use efficiency and equity are based on markets with inter-sectoral trade, specifically formal markets. Only about 27% of the reviewed studies found that both the objectives of equity and efficiency can be achieved simultaneously with water trading. The impact of water markets on efficiency depends on five factors viz. soft infrastructure/institutional governance, hard infrastructure, physical water scarcity, reliability/Trust in the water market system, and social acceptance. The difference in the very nature of the buyers and sellers in the formal and informal markets largely explains the difference in the functioning of the respective markets. Thus, this study highlights the range of factors behind the heterogeneity in the results of the reviewed studies on the given theme that can support the policy makers in framing the customized water trading policies.