Water Institutional Reforms in Developing Countries

This chapter is essentially an attempt to explain the anomaly of why institutional changes are not occurring even when the opportunity costs of status quo well exceed the transactions costs of these changes. While usual explanation relies on political economy arguments, this chapter shows the importance of the transaction cost implications of the institutional linkages that originate actually from the internal features and the external environment of institutions. This chapter has theoretically explained the origin of institutional linkages and described their implications for reform design and implementation principles. It has also analytically demonstrated these linkages with the application of the Institutional Analysis and Development framework to water institutions. By incorporating the transaction costs and political economy implications of institutional linkages, the chapter has also outlined a generalized transaction cost framework. Anecdotal and case study-based evidences are, then, provided to illustrate how institutional linkages are used in deriving and applying reform design and implementation principles such as institutional prioritization, sequencing, and packaging as well as reform timing and scale. Based on the discussion of the analytical approaches and practical illustrations, the chapter concludes by identifying implications for theory and policy in the realm of institutional reform.