Efficiency and Equity in the Distribution of Renewable Resources : Water Allocation in the Jordan River Watershed

Previous work on shared renewable resource distribution has generally focused on unilateral and bilateral policy approaches or a tradable market system. Neither approach guarantees efficiency and equity simultaneously. We propose an integrated law and economic policy-based management plan that divides property rights into rights to use and rights from which to earn income. Both rights are determined based upon multilateral negotiations and the environmental sustainability of the ecosystem. Rights to use should be domestically utilized by the parties that share the resource and the income rights should be regularly auctioned. This guarantees shareholders some access to the resource and generously compensates them for any amount auctioned, while at the same time allocating a large portion of the resource to its highest marginal benefit. The system is tested on the River Jordan Basin, and we conclude that, if applied, water can be allocated more efficiently and equitably than under the current water regimes while at the same time reduce political and military tension in the region