Federal versus regional control over provision of resources can have different implications for long-run sustainability of natural resources. This project examines the trade-off between short-term growth and long-term conservation incentives of elected legislators from regional and national political parties for groundwater provision. Regional legislators have a stronger incentive to promote regional growth, which can lead to a rapid decline of resource stocks. On the other hand, regional parties are limited to contesting elections from the region, and hence have stronger incentives to conserve resources for future periods. These two effects can offset each other. This project proposes and tests the hypothesis that under high cost of provision to the legislators, regional regimes can lead to conservation because they internalise inter-temporal (that is, accross different time periods) externalities. The project uses nationally representative data on groundwater from India, and an increase in the cost of groundwater provision for the legislators induced by the reforms in the electricity sector, to show that private competition induced in electricity sector leads to groundwater conservation under regional regime.

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