Formal versus Informal System to Mitigate Non-point Source Pollution: An Experimental Investigation

Water pollution caused by aquaculture or agricultural activities negatively affects both the activity and downstream areas. A number of other upstream-downstream problems (e.g. water use, industrial/municipal water source pollution, salinity zoning problems) are examples of similar negative externalities. Non-point source pollution, which is either prohibitively costly or impossible to observe, is more feasible to identify, and hence mitigate at the aggregate level. We study experimentally the efficacy of two possible management systems: a centralised external, formal government-led monitoring and control system; a self-governing communication and informal system, both designed to manage shrimp farming, which generates a non-point source pollution with upstream-downstream externalities. Our results suggest that local communication and control outperforms the external monitoring and certification agency. These results, in conjunction with other relevant research, suggest that informal regulation and self-governance among shrimp farmers can be highly successful in tackling the pollution problem.