Research on institutional arrangements for water allocation covers three major types of water allocation: public allocation, user-based allocation, and market allocation. This work includes attention to water rights and to the organizations involved in water allocation and management, as well as a comparative study of the consequences of water reallocation from irrigation to other sectors. A key aspect of this research is the identification of different stakeholders' interests, and the consequences of alternative institutions for the livelihoods of the poor.
Water rights are gaining recognition as a key institution at the heart of water allocation, and shaping the incentives that people and organizations have to manage water. Yet many treatments of water rights use overly rigid concepts that do not recognize the range of water rights. This research employs the perspective of legal pluralism, acknowledging that water rights derive not only from state law, but also local and customary law, religious law, and other sources. The interplay between these types of law is an important source of flexibility and dynamism in water allocation. Particular attention is given to negotiation processes in the allocation and reallocation of water.
Water markets have been suggested as a response to changing water demands, to provide incentives for water demand management. Recently completed research on this topic considers the conditions under which this would hold, what would be required to set up tradable water rights systems, and how markets for groundwater operate in Pakistan.
The capacity and incentive structure of organizations involved in water management play a major role the equity, efficiency, and sustainability of resource use. Research on this topic has examined the structure of government agencies, water users' associations, and mechanisms set up to link different stakeholder groups. Recently completed research on major canal irrigation systems in India indicates that reforms to set up financially autonomous irrigation agencies, and to increase the participation of organized user groups have made some progress, but have not gone far enough to achieve full success. In particular, more attention needs to be given to the incentive for farmers to participate, and for government agency staff to be more responsive to farmers' concerns. Stronger regulatory bodies are also needed if water prices are to be increased, either as an instrument of cost recovery or for demand management.
As demand for water continues to grow and developed water resources are almost fully utilized, there is increasing pressure to transfer water from agriculture--the major water user--to other water-using sectors, especially cities and factories. Ongoing research in India, Nepal, and Sri Lanka examines the existing institutional arrangements for taking water out of agriculture, identifies the key stakeholders, and assesses the consequences for equity, livelihoods, and rural landscapes. It also seeks to identify alternative institutional arrangements that increase local participation in the transfer process and mitigate negative effects on farmers and the rural poor. At both the river basin and local level, some water allocation decisions require tradeoffs with winners and losers, but in many instances, other ways of handling water allocation can lead to "win-win" solutions. Particular efforts are made to ensure that stakeholders who are often overlooked, especially women and third parties affected by reallocation, are included in discussions and negotiations over water transfers.