Waters run deep: A coupled Revealed Preference and CGE model to assess the economy-wide impacts of agricultural water buyback

Little is known about the economy-wide repercussions of water buyback, which may include relevant feedbacks on the output of economic sectors at a regional and supra-regional scale. Limited applied studies available rely on stand-alone Computable General Equilibrium (CGE) models that represent competition for water explicitly, but this approach presents significant data and methodological challenges in areas where mature water markets are not in place the case of most regions worldwide. To bridge this gap, this paper couples a bottom-up Revealed Preference Model that elicits the value and price share to water with a top-down, regionally-calibrated CGE model for Spain. Methods are illustrated with a case study in the Murcia Region in southeastern Spain. Economy-wide feedbacks amplify income losses in Murcia's agriculture from -20.5% in the bottom-up model up to -33% in the coupled model. Compensations paid to irrigators enhance demand in the region, but supply contraction in agriculture and related sectors lead to a GDP loss (up to -2.1%) in most scenarios. The supply gap is partially filled in by other Spanish regions, which experience a GDP gain through a substitution effect (up to +.034%). In all scenarios, aggregate GDP for Spain decreases (up to -.023%). Acknowledgement : This research has received funding from the AXA Research Fund through the Post-Doctoral Fellowships Campaign 2015, and from the Climate-KIC Europe through the Climate Smart Agriculture Booster project AGRO ADAPT (Service for local and economy wide assessment of adaptation actions in agriculture).