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Impact of water price reform on water conservation and economic growth in China

Author

Listed:
  • Zhao, Jing
  • Ni, Hongzhen
  • Peng, Xiujian
  • Li, Jifeng
  • Chen, Genfa
  • Liu, Jinhua

Abstract

Water pricing has been used as an effective method of conserving water and optimizing water allocation. However, little is known about how to set a rational and efficient water price and how water pricing impacts economic growth. In this paper, we address this challenge by using the SICGE model, a dynamic general equilibrium model for China that is augmented by a total water constraint module. We also include a water subdivision module that allows for substitution between various water sources. These extensions facilitate a comprehensive estimate of the impact that various water price reforms have on water conservation and economic growth. The modeling results confirm that an increase in the water price will lead to a decline in total water usage, a better water use structure, and enhanced water use efficiency. We conclude with a comparison of multiple scenarios that suggests an optimal water price system.

Suggested Citation

  • Zhao, Jing & Ni, Hongzhen & Peng, Xiujian & Li, Jifeng & Chen, Genfa & Liu, Jinhua, 2016. "Impact of water price reform on water conservation and economic growth in China," Economic Analysis and Policy, Elsevier, vol. 51(C), pages 90-103.
    • Handle: RePEc:eee:ecanpo:v:51:y:2016:i:c:p:90-103
    DOI: 10.1016/j.eap.2016.06.003
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    3. Zheng, Jiajia & Kamal, Muhammad Abdul, 2020. "The effect of household income on residential wastewater output: Evidence from urban China," Utilities Policy, Elsevier, vol. 63(C).
    4. Darshana Rajapaksa & Robert Gifford & Benno Torgler & María A. García-Valiñas & Wasantha Athukorala & Shunsuke Managi & Clevo Wilson, 2019. "Do monetary and non-monetary incentives influence environmental attitudes and behavior? Evidence from an experimental analysis," Post-Print hal-03191523, HAL.
    5. Shyama Ratnasiri & Clevo Wilson & Wasantha Athukorala & Maria A. Garcia-Valiñas & Benno Torgler & Robert Gifford, 2018. "Effectiveness of two pricing structures on urban water use and conservation: a quasi-experimental investigation," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 20(3), pages 547-560, July.
    6. Ying Wang & Xichen Lin & Hongzhen Ni, 2025. "Impact of Production Tax Policy on Water Resource and Economy: A Case Study of Wenling City," Sustainability, MDPI, vol. 17(18), pages 1-19, September.
    7. Iago de Carvalho Mello & Marina Batalini de Macedo & Daniel Thá, 2026. "Economic Instruments in Water Resource Management: A Critical Review of Water Pricing and Hydro-Economic Models," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 40(4), pages 1-19, March.
    8. Yuanjie Li & Zhuoying Zhang & Minjun Shi, 2019. "Restrictive Effects of Water Scarcity on Urban Economic Development in the Beijing-Tianjin-Hebei City Region," Sustainability, MDPI, vol. 11(8), pages 1-23, April.
    9. Teotónio, Carla & Rodríguez, Miguel & Roebeling, Peter & Fortes, Patrícia, 2020. "Water competition through the ‘water-energy’ nexus: Assessing the economic impacts of climate change in a Mediterranean context," Energy Economics, Elsevier, vol. 85(C).
    10. Li, Xuxia & Wang, Huimin & Liu, Gang & Yang, Liu & Fang, Zhou & Xiao, Yi & Lai, Xiaoying & Gao, Li & Teng, Ying, 2025. "An “initial-engineering-end use” quasi-market pricing mechanism under cascading risk for cross-regional water rights trading," Agricultural Water Management, Elsevier, vol. 309(C).
    11. Yao, Peng & Wang, Yutong & Liu, Jianxu, 2023. "Can water pollution control influence employment adjustment in enterprises?," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 384-397.

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