Abstract: More than one-quarter of the world’s population lives in water-scarce areas, while most countries share at least one river that crosses the boundary of at least one other riparian country. If water scarcity is this prevalent, should we expect riparian countries to fight over the water allocation of shared rivers? To answer this question, I develop a modified one-shot three-stage river sharing game where countries can resort to force to solve their water allocation problem. The purpose of this game is to show the decision process of two riparian countries facing water scarcity. Using backward induction, I solve for the probability of the downstream country initiating conflict against the upstream country, and the likelihood of the latter responding with force to the former’s hostile actions. I test the model empirically using the complementary log-log model and a set of all upstream-downstream riparian dyads with available data from AQUASTAT and the Correlates of War Project for the years 1960 to 2010. The main contribution of this paper is that it demonstrates how upstream and downstream riparian countries differ in their decision to use force against the other country when facing different water stress levels. On average, the probability of the downstream country initiating conflict increases by 19 percent if the downstream country has a water scarcity problem that leads to regular water shortage or prevents the country from meeting its economics needs or the basic water demand of its population. In contrast, if the upstream country in the dyad can barely reach the basic water needs of its population and the downstream country is more powerful, the likelihood of the downstream country initiating conflict increases by 15 percent while the probability of the upstream country responding with force increases by up to 10 percent. The results suggest that increased conflict over water between upstream and downstream riparian countries is not farfetched.
(JEL Codes: F51, Q25, Q27, Q34)