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The Economics of Water Resource Allocation: Valuation Methods and Policy Implications

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  • Ben Groom
  • Phoebe Koundouri

Abstract

In this chapter a �watershed economics approach� that could be applied in Cyprus is proposed which is composed of two important stages. In Stage I economic valuation techniques are used to establish the economic value of the competing demands for surface and groundwater, incorporating where necessary an analysis of water quality. The valuation exercise allows the objective balancing of demands based upon the equi-marginal principle to achieve economic efficiency. In Stage II a policy impact analysis is proposed which addresses issues of social equity and the value of water for environmental/ecological purposes. The analysis is undertaken within the confines of the watershed; the most natural unit for the analysis of water allocation and scarcity since it determines the hydrological links between competing users and thus the impacts of one user upon another. The methodology is encapsulated by a case study of the Kouris watershed in Cyprus.

Suggested Citation

  • Ben Groom & Phoebe Koundouri, 2011. "The Economics of Water Resource Allocation: Valuation Methods and Policy Implications," DEOS Working Papers 1137, Athens University of Economics and Business.
    • Handle: RePEc:aue:wpaper:1137
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    References listed on IDEAS

    as
    1. Koundouri, Phoebe & Pashardes, Panos & Swanson, Timothy & Xepapadeas, Anastasios, 2003. "The Economics of Water Management in Developing Countries Problems, Principles and Policies," MPRA Paper 38137, University Library of Munich, Germany.
    2. Hajispyrou, Soteroula & Koundouri, Phoebe & Pashardes, Panos, 2002. "Household demand and welfare: implications of water pricing in Cyprus," Environment and Development Economics, Cambridge University Press, vol. 7(4), pages 659-685, October.
    3. Phoebe Koundouri & Anastasios Xepapadeas, 2004. "Estimating accounting prices for common pool natural resources: A distance function approach," DEOS Working Papers 0405, Athens University of Economics and Business.
    4. Phoebe Koundouri & Panos Pashardes & Timothy Swanson & Anastasios Xepapadeas, "undated". "The Economics of Water Management in Developing Countries Problems, Principles and Policies," DEOS Working Papers 0303, Athens University of Economics and Business.
    5. Phoebe Koundouri & Panos Pashardes, 2003. "Hedonic Price Analysis and Selectivity Bias," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 26(1), pages 45-56, September.
    6. Phoebe Koundouri & Panos Pashardes & Timothy M. Swanson & Anastasios Xepapadeas (ed.), 2003. "The Economics of Water Management in Developing Countries," Books, Edward Elgar Publishing, number 2846.
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    Cited by:

    1. Stella Tsani & Phoebe Koundouri & Ebun Akinsete, 2020. "Resource management and sustainable development: A review of the European water policies in accordance with the United Nations' Sustainable Development Goals," DEOS Working Papers 2036, Athens University of Economics and Business.

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    More about this item

    Keywords

    Watershed economics approach; Economic valuation techniques; Balancing demands; Social equity; Kouris watershed;
    All these keywords.

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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