The Economic Impact Of Restricted Water Supply: A Computable General Equilibrium Analysis
Water problems are typically studied at the level of the river catchment. About 70% of all water is used for agriculture, and agricultural products are traded internationally. A full understanding of water use is impossible without understanding the international market for food and related products, such as textiles. The water embedded in commodities is called virtual water. Based on a general equilibrium model, we offer a method for investigating the role of water resources and water scarcity in the context of international trade. We run five alternative scenarios, analysing the effects of water scarcity due to reduced availability of groundwater. This can be a consequence of physical constraints, and of policies curbing water demand. Four scenarios are based on a “market solution”, where water owners can capitalize their water rent or taxes are recycled. In the fifth “non-market” scenario, this is not the case; supply restrictions imply productivity losses. Restrictions in water supply would shift trade patterns of agriculture and virtual water. These shifts are larger if the restriction is larger, and if the use of water in production is more rigid. Welfare losses are substantially larger in the non-market situation. Water-constrained agricultural producers lose, but unconstrained agricultural produces gain; industry gains as well. As a result, there are regional winners and losers from water supply constraints. Because of the current distortions of agricultural markets, water supply constraints could improve allocative efficiency; this welfare gain may more than offset the welfare losses due to the resource constraint.
|Date of creation:||Jan 2006|
|Date of revision:||Jul 2006|
|Publication status:||Published, Water Research, 42, 1799-1813|
|Contact details of provider:|| Postal: |
Phone: +49 40 42838 6593
Fax: +49 40 42838 7009
Web page: http://www.fnu.zmaw.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dinar, Ariel & Yaron, Dan, 1992. "Adoption and abandonment of irrigation technologies," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 6(4), April.
- Diao, Xinshen & Roe, Terry, 2003. "Can a water market avert the "double-whammy" of trade reform and lead to a "win-win" outcome?," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 708-723, May.
- Decaluwe, B. & Patry, A. & Savard, L., 1999.
"`When Water Is No Longer Heaven Sent: Comparative Pricing Analysis in an AGE Model,"
9905, Laval - Recherche en Politique Economique.
- Decaluwé, B. & Patry, A. & Savard, L., 1999. "When Water is no Longer Heaven Sent: Comparative Pricing Analysis in an AGE Model," Cahiers de recherche 9908, Université Laval - Département d'économique.
- Wolfram Schlenker & W. Michael Hanemann & Anthony C. Fisher, 2005. "Will U.S. Agriculture Really Benefit from Global Warming? Accounting for Irrigation in the Hedonic Approach," American Economic Review, American Economic Association, vol. 95(1), pages 395-406, March.
- Noelwah R. Netusil & Thomas R. Harris & Chang K. Seung & Jeffrey E. Englin, 2000. "Impacts of water reallocation: A combined computable general equilibrium and recreation demand model approach," The Annals of Regional Science, Springer, vol. 34(4), pages 473-487.
- Bouwer, Herman, 2000. "Integrated water management: emerging issues and challenges," Agricultural Water Management, Elsevier, vol. 45(3), pages 217-228, August.
- Dinar, Ariel & Yaron, Dan, 1992. "Adoption and abandonment of irrigation technologies," Agricultural Economics, Blackwell, vol. 6(4), pages 315-332, April.
- Yang, Hong & Zehnder, Alexander J. B., 2002. "Water Scarcity and Food Import: A Case Study for Southern Mediterranean Countries," World Development, Elsevier, vol. 30(8), pages 1413-1430, August.
- Burniaux, Jean-Marc & Truong Truong, 2002. "GTAP-E: An Energy-Environmental Version of the GTAP Model," GTAP Technical Papers 923, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
When requesting a correction, please mention this item's handle: RePEc:sgc:wpaper:93. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Uwe Schneider)
If references are entirely missing, you can add them using this form.