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Economic Efficiency Implications of Federal‐Local Cost Sharing in Water Resource Development
Author(s) -
Marshall Harold Emory
Publication year - 1970
Publication title -
water resources research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.863
H-Index - 217
eISSN - 1944-7973
pISSN - 0043-1397
DOI - 10.1029/wr006i003p00673
Subject(s) - incentive , local development , cost sharing , business , local economic development , local community , resource (disambiguation) , environmental economics , land reclamation , shared resource , service (business) , social cost , economics , microeconomics , computer science , marketing , economic growth , regional science , history , ecology , computer network , archaeology , political science , law , biology , geography
The Army Corps of Engineers, Bureau of Reclamation, and Soil Conservation Service share costs of water resource development with nonfederal groups. An efficiency problem results when cost sharing rules induce local groups to demand projects that, although efficient for the local community, are not most efficient for society. An examination of present cost sharing shows that there are inconsistencies in cost sharing rules and practices among agencies. Such inconsistencies induce local groups to select techniques of production and scales of development that are not socially efficient. Two general rules for eliminating these inefficiencies are (1) to share in the same proportion costs of all techniques used to provide a single purpose, and (2) to share costs for a single purpose in proportion to benefits received at the margin. Application of these rules would result in lower social expenditures and higher local expenditures for a given level of development, and local groups would not have such strong incentives to shop among agencies for the lowest local cost share.