Decentralizing Corruption ? Irrigation Reform in Pakistan ’ s Indus Basin

Does a shift from central bureaucratic control of a public service to local management reduce corruption? We consider governance reform in the world’s largest canal irrigation system, that of Pakistan’s Indus basin watershed. Using a large administrative database of water discharge readings covering the universe of irrigation channels in Punjab province from 2006-14, we construct and validate a measure of illegal water diversion along a channel. Based on this measure and two alternative panel-data strategies, we find that water theft on channels whose management was taken over by locally elected farmer organizations (FOs) increased compared to control channels that remained centrally managed under authority of the provincial irrigation department. We find no evidence that this apparent increase in rent-seeking under decentralization is mitigated when constituencies most vulnerable to water theft are better represented within the FO leadership. ∗World Bank, 1818 H St NW, Washington DC 20433. Corresponding author: Hanan Jacoby: hjacoby@worldbank.org. Financial support for this project was provided by the Knowledge for Change Program. The views expressed herein are those of the authors, and do not necessarily reflect the opinions of the World Bank, its executive directors, or the countries they represent.

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