A Coasian Approach to Efficient Water Allocation of a Transboundary River
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The United States and Mexico recently resolved a decade-old water dispute that required
Mexico to repay the accumulated water debt within one year. A Coasian analysis estimates
the social welfare gains attainable to each country under an alternative debt repayment
scheme that allows repayment over a longer time horizon and in a combination of dollars
and water, instead of solely in water. Assuming average water supply conditions, under the
agreed 1-year repayment contract, U.S. compensation value is 534% greater and Mexico’s
compensation cost is 60% less relative to when compensation is paid exclusively in water.