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Integrated water and economic modelling of the impacts of water market instruments on the South African economy

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  • van Heerden, Jan H.
  • Blignaut, James
  • Horridge, Mark

Abstract

A static computable general equilibrium model of South Africa is adapted to compare new taxes on water demand by two industries, namely forestry, and irrigated field crops. Comparisons are made with respect to both the short and the long run, in terms of three target variables, namely (i) the environment; (ii) the economy; and (iii) equity. Since the taxes on the two industries do not raise the same amount of revenue, the target variables are calculated per unit of real government revenue raised by the new taxes (also referred to as the marginal excess burdens of the taxes). The model results are robust for moderate values of the water elasticity of demand in the two industries, in both the long and the short run. The tax on irrigated field crops performs better in terms of all three the target variables in the short run. In the long run the tax on irrigated filed crops is better in terms of water saving, but reduces real GDP and the consumption by poor households.

Suggested Citation

  • van Heerden, Jan H. & Blignaut, James & Horridge, Mark, 2008. "Integrated water and economic modelling of the impacts of water market instruments on the South African economy," Ecological Economics, Elsevier, vol. 66(1), pages 105-116, May.
  • Handle: RePEc:eee:ecolec:v:66:y:2008:i:1:p:105-116
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    References listed on IDEAS

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    1. Rosegrant, M.W. & Ringler, C. & McKinney, Daene C. & Cai, X. & Keller, Andrew & Donoso, G., 2000. "Integrated economic-hydrologic water modeling at the basin scale: the Maipo river basin," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 24(1), December.
    2. Cai, Ximing & McKinney, Daene C. & Rosegrant, Mark W., 2003. "Sustainability analysis for irrigation water management in the Aral Sea region," Agricultural Systems, Elsevier, vol. 76(3), pages 1043-1066, June.
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    4. Roe, Terry & Dinar, Ariel & Tsur, Yacov & Diao, Xinshen, 2005. "Feedback links between economy-wide and farm-level policies: With application to irrigation water management in Morocco," Journal of Policy Modeling, Elsevier, vol. 27(8), pages 905-928, November.
    5. Jan van Heerden & Reyer Gerlagh & James Blignaut & Mark Horridge & Sebastiaan Hess & Ramos Mabugu & Margaret Mabugu, 2006. "Searching for Triple Dividends in South Africa: Fighting CO2 Pollution and Poverty while Promoting Growth," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 113-142.
    6. Steven Renzetti, 1992. "Estimating the Structure of Industrial Water Demands: The Case of Canadian Manufacturing," Land Economics, University of Wisconsin Press, vol. 68(4), pages 396-404.
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    Cited by:

    1. Magdalena ZACHLOD-JELEC & Piotr KARP, "undated". "Responses of the Polish Economy to Demand and Supply Shocks under Alternative Fiscal Rules," EcoMod2010 259600174, EcoMod.
    2. Nicholas Rivers & Steven Groves, 2013. "The Welfare Impact of Self-supplied Water Pricing in Canada: A Computable General Equilibrium Assessment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 55(3), pages 419-445, July.
    3. Alvaro Calzadilla & Katrin Rehdanz & Richard S.J. Tol, 2008. "The Eonomic Impact Of More Sustainable Water Use In Agriculture: A Computable General Equilibrium Analysis," Working Papers FNU-169, Research unit Sustainability and Global Change, Hamburg University, revised Dec 2008.
    4. James Blignaut & Jan van Heerden, 2009. "Is Water Shedding Next?," Working Papers 141, Economic Research Southern Africa.
    5. Jeniffer Mutiga & Shadrack Mavengano & Su Zhongbo & Tsehaie Woldai & Robert Becht, 2010. "Water Allocation as a Planning Tool to Minimise Water Use Conflicts in the Upper Ewaso Ng’iro North Basin, Kenya," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 24(14), pages 3939-3959, November.
    6. Glyn Wittwer, 2012. "Accelerated water savings and demand growth for farm outputs: impacts on the economy of the southern Murray-Darling Basin," Centre of Policy Studies/IMPACT Centre Working Papers g-232, Victoria University, Centre of Policy Studies/IMPACT Centre.
    7. Gill, Tania & Punt, Cecilia, 2010. "The Potential Impact of Increased Irrigation Water Tariffs in South Africa," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 96425, African Association of Agricultural Economists (AAAE);Agricultural Economics Association of South Africa (AEASA).
    8. Dinar, Ariel, 2012. "Economy-wide implications of direct and indirect policy interventions in the water sector: lessons from recent work and future research needs," Policy Research Working Paper Series 6068, The World Bank.
    9. Nicholas Kilimani & Jan van Heerden & Heinrich Bohlmann & Louise Roos, 2016. "Counting the cost of drought induced productivity losses in an agro-based economy: The case of Uganda," Working Papers 616, Economic Research Southern Africa.
    10. Jacobsen, Lars-Bo & Nielsen, Max & Nielsen, Rasmus, 2016. "Gains of integrating sector-wise pollution regulation: The case of nitrogen in Danish crop production and aquaculture," Ecological Economics, Elsevier, vol. 129(C), pages 172-181.
    11. Alvaro Calzadilla & Katrin Rehdanz & Richard S.J. Tol, 2008. "Water Scarcity And The Impact Of Improved Irrigation Management: A Cge Analysis," Working Papers FNU-160, Research unit Sustainability and Global Change, Hamburg University, revised Apr 2008.
    12. Feng Wu & Jinyan Zhan & Qian Zhang & Zhongxiao Sun & Zhan Wang, 2014. "Evaluating Impacts of Industrial Transformation on Water Consumption in the Heihe River Basin of Northwest China," Sustainability, MDPI, Open Access Journal, vol. 6(11), pages 1-14, November.
    13. Chokri Thabet, 2014. "Water Policy and Poverty Reduction in Rural Area: A Comparative Economy Wide Analysis for Morocco and Tunisia," Working Papers 860, Economic Research Forum, revised Nov 2014.
    14. Nicholas Kilimani, 2014. "Water Taxation and the Double Dividend Hypothesis," Working Papers 201451, University of Pretoria, Department of Economics.
    15. repec:eee:ecomod:v:222:y:2011:i:2:p:330-336 is not listed on IDEAS
    16. Mohamed A. Chemingui & Chokri Thabet, 2016. "Economy-Wide Analysis of Alternative Water Management Policies: A Comparative Analysis for Morocco and Tunisia," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 2(04), pages 1-27, December.
    17. Anne-Kathrin Faust & Camille Gonseth & Marc Vielle, 2012. "The economic impact of climate driven changes in water availability in Switzerland," EcoMod2012 4177, EcoMod.
    18. Calzadilla, Alvaro & Rehdanz, Katrin & Tol, Richard S.J., 2011. "The GTAP-W model: Accounting for water use in agriculture," Kiel Working Papers 1745, Kiel Institute for the World Economy (IfW).
    19. Cristina Sarasa & Jean-Marc Philip & Julio Sánchez-Chóliz, 2013. "A tax policy strategy faces with future water availability using a dynamic CGE approach," EcoMod2013 5349, EcoMod.
    20. Brouwer, Roy & Hofkes, Marjan, 2008. "Integrated hydro-economic modelling: Approaches, key issues and future research directions," Ecological Economics, Elsevier, vol. 66(1), pages 16-22, May.

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