Policy Design and Governance Effectiveness: The Role of Non‐Linearities in Urban Water Management

ABSTRACT International Organizations formulate and disseminate principles of good governance for issues such as urban water governance. These principles are formulated in universal and general terms, for example, more transparency or participation, and are intended to enhance governance effectiveness. Yet, the relationship between such principles and governance effectiveness is not linear. Different combinations of principles affect governance effectiveness differently, depending on the context. It raises the general question of the influence of policy instruments interactions on policy outcomes. We investigate two types of non‐linearities. The first, direct non‐linearities, are instrument‐specific and characterized by two thresholds: a minimum level required to ensure effectiveness, and a second level beyond which positive effects begin to decrease marginally. The second type, compositional non‐linearities, refers to the idea that policy instruments are most effective when combined in specific ways (joint effect) or by being an enabling condition for others. We study the case of urban water governance in 35 megacities worldwide, based on empirical data from OECD reports and a fuzzy‐set Qualitative Comparative Analysis. The present study assesses the impact of assesses how combinations of economic, participatory, and regulatory policy instruments affect urban water loss, as a policy outcome. We found that price and wealth are important enabling conditions within the policy design. Regulation and participation have important joint effects and follow the logic of direct non‐linearities. Their absence or excessive presence can be detrimental, but they are critical for effectiveness when combined with other policy instruments.