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


  • Ben Groom
  • Phoebe Koundouri


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, "undated". "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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    1. 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(04), pages 659-685, October.
    2. 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.
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    More about this item


    Watershed economics approach; Economic valuation techniques; Balancing demands; Social equity; Kouris watershed;

    JEL classification:

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


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