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Growth, Water Resilience, and Sustainability: A DSGE Model Applied to South Africa

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  • Li, Chuan-Zhong

    (Department of Economics)

  • Bali Swain, Ranjula

    (Department of Economics)

Abstract

In this paper, we analyze a dynamic stochastic general equilibrium model on how water resilience a¤acts economic growth and dynamic welfare with special reference to South Africa. While water may become a limiting factor for future development in general, as a drought prone and water poor country with rapid population growth, South Africa may face more serious challenges for sustainable development in the future. Using the model, we conduct numerical simulation for di¤erent parameter configurations with varying discount rate, climate change assumption, and the degree of uncertainty in future precipitation. We find that with sufficient capital accumulation, development can still be made sustainable despite of increased future water scarcity and decreased long-run sustianable welfare; While sto- chastic variation in precipitation has a negatively e¤ect on water resilience and the expected dynamic welfare, the effect is mitigated by persistence in the precipitation pattern. With heavier time discounting and lower capital formation, however, the current welfare may not be sustained.

Suggested Citation

  • Li, Chuan-Zhong & Bali Swain, Ranjula, 2014. "Growth, Water Resilience, and Sustainability: A DSGE Model Applied to South Africa," Working Paper Series 2014:11, Uppsala University, Department of Economics.
    • Handle: RePEc:hhs:uunewp:2014_011
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    2. Dario Aversa & Nino Adamashvili & Mariantonietta Fiore & Alessia Spada, 2022. "Scoping Review (SR) via Text Data Mining on Water Scarcity and Climate Change," Sustainability, MDPI, vol. 15(1), pages 1-13, December.

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    More about this item

    Keywords

    Water resilience; growth; dynamic Welfare; sustainability;
    All these keywords.

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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