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When Water is no Longer Heaven Sent: Comparative Pricing Analysis in an AGE Model

Listed author(s):
  • Decaluwé, B.
  • Patry, A.
  • Savard, L.

In this paper we present a applied general equilibrium model with special features that allows for comparative analysis of different pricing scheme. We look at Boiteux-Ramsey Pricing, Marginal Cost Pricing as well as an arbitrary water pricing increase for the agriculture sectors. A standard AGE was adapted by explicitly modeling water production with its different technologies, water demand by different users also needed to be refined since they are generally modeled with fixed coefficient with no substitution allowed. Results show that the choice of applying one policy over another can rely on the water management authorities (or government)objectives. If considering economic efficiency and water conservation the Boiteux-Ramsey pricing seems to be the best alternative. Moreover, we show that BRP become more clearly advantageous vs MCP the more rigid (small capacities to substitute water for other inputs) the economy's agents.

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Paper provided by Université Laval - Département d'économique in its series Cahiers de recherche with number 9908.

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Date of creation: 1999
Handle: RePEc:lvl:laeccr:9908
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