Meeting Water Needs in Developing Countries: Resolving Issues in Establishing Tradable Water Rights

Abstract

Recent approaches to meet the growing water demand have focused on voluntary mechanisms to conserve water and to reallocate it among competing uses rather than on developing new sources. They have also focused on alternative ways to finance the operations and management of existing infrastructure and the construction of new infrastructure. These approaches, referred to here as “market-based instruments for water management,” may be divided into three categories: pricing policies, informal water markets, and formal water markets. While proponents recognize that such approaches will not resolve all water problems, they believe that they have many advantages over administrative mechanisms.

Another version of this article appeared in the 1997 World Bank Research Observer, 12(2):161–79. The author would like to acknowledge useful comments sent by Lorena Alcazar, Ariel Dinar, K. William Easter, Karin Kemper, Larry Simpson and Ashok Subramanian.