Skip to main content
SpringerLink
Log in

Implications of Water Scarcity for Economic Growth

  • Chapter
  • First Online:
Economy-Wide Modeling of Water at Regional and Global Scales

Part of the book series: Advances in Applied General Equilibrium Modeling ((AAGEM))

Abstract

This chapter provides background information useful for a quantitative global assessment of the impact of water scarcity on growth using a Computable General Equilibrium (CGE ) model. It provides a detailed review of the literature on water, water scarcity , sectoral activity and economic growth , and identifies the possibilities and bottlenecks in incorporating water use into a CGE framework. It covers water use in agriculture, energy production, households, industry and services. Finally, it discusses water supply and allocation. There are ample opportunities for conserving water across its various uses. Economic incentives would hasten water efficiency gains.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 129.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Hardcover Book
USD 169.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    This expression offers a local approximation to EV , for large changes, the price and quantity levels must also change. The ensuing numerical integration is what allows us to compute the sources of EV for large shocks.

  2. 2.

    Of course what matters here is the marginal price of water being paid. In urban areas, a significant part of the water charge may be due to fixed connection fees. In this case there may be a significant difference between the marginal and average prices of water.

  3. 3.

    See the derivation in (Hertel et al. 2009).

References

  • Baker JE (2011) The impact of including water constraints on food production within a CGE framework, Massachusetts Institute of Technology

    Google Scholar 

  • Barbier EB (2004) Water and economic growth. Econ Rec 80:1–16

    Article  Google Scholar 

  • Bell A, Zhu T, Xie H, Ringler C (2014) Climate–water interactions—challenges for improved representation in integrated assessment models. Energy Econ 46:510–521

    Google Scholar 

  • Berrittella M, Hoekstra AY, Rehdanz K, Roson R, Tol RSJ (2007) The economic impact of restricted water supply: a computable general equilibrium analysis. Water Res 41:1799–1813

    Google Scholar 

  • Bhattacharya A, Bijon M (2013) Water availability for sustainable energy policy: assessing cases in South and South East Asia. Inst Glob Env Strategies

    Google Scholar 

  • Brown TC (1991) Water for wilderness areas: instream flow needs, protection, and economic value. Rivers 2:311–325

    Google Scholar 

  • Calzadilla A, Rehdanz K, Tol RSJ (2011) The GTAP-W model: accounting for water use in agriculture (No. 1745). Kiel Working Papers

    Google Scholar 

  • Darwin R, Tsigas ME, Lewandrowski J, Raneses A (1995) World agriculture and climate change: economic adaptations. USDA, Economic Research Service, USA

    Google Scholar 

  • Decaluwe B, Patry A, Savard L (1999) When water is no longer heaven sent: comparative pricing analysis in a AGE model. Département d’économique, Université Laval Working Paper 9908

    Google Scholar 

  • De Stefano L, Edwards P, De Silva L, Wolf AT (2010) Tracking cooperation and conflict in international basins: historic and recent trends. Water Policy 12(6):871–884

    Google Scholar 

  • Diao X, Dinar A, Roe T, Tsur Y (2008) A general equilibrium analysis of conjunctive ground water and surface water use with an application to Morocco. Agric Econ 38:117–135

    Google Scholar 

  • Dixon PB, Rimmer MT, Wittwer G (2011) Saving the southern Murray-Darling Basin: the economic effects of a buyback of irrigation water. Econ Rec 87:153–168

    Article  Google Scholar 

  • Döll P, Kaspar F, Lehner B (2003) A global hydrological model for deriving water availability indicators: model tuning and validation. J Hydrol 270(1–2):105–134

    Google Scholar 

  • Dudu H, Chumi S (2008) Economics of irrigation water management: a literature survey with focus on partial and general equilibrium models. SSRN Scholarly Paper No. ID 1106504. Rochester, NY

    Google Scholar 

  • Gerbens-Leenes W, Hoekstra AY, van der Meer TH (2009) The water footprint of bioenergy. Proc Natl Acad Sci 106:10219–10223

    Article  Google Scholar 

  • Gerten D, Schaphoff S, Haberlandt U, Lucht W, Sitch S (2004) Terrestrial vegetation and water balance—hydrological evaluation of a dynamic global vegetation model. J Hydrol 286(1–4):249–270

    Google Scholar 

  • Golub A, Hertel TW, Lee H-L, Rose S, Sohngen B (2009) The opportunity cost of land use and the global potential for greenhouse gas mitigation in agriculture and forestry. Resour Energy Econ 31:299–319

    Article  Google Scholar 

  • Gómez CM, Tirado D, Rey-Maquieira J (2004) Water exchanges versus water works: Insights from a computable general equilibrium model for the Balearic Islands. Water Resour Res 40:W10502

    Article  Google Scholar 

  • Griffin RC (2006) Water resource economics: the analysis of scarcity, policies, and projects. The MIT Press

    Google Scholar 

  • Hanoch G (1975) Production and demand models with direct or indirect implicit additivity. Econometrica 43:395–419

    Article  Google Scholar 

  • Haqiqi I, Taheripour F, Liu J, van der Mensbrugghe D (2016) Introducing Irrigation Water into GTAP Data Base Version 9. J Global Ec Analysis 1:116–155

    Article  Google Scholar 

  • Hassan R, Thurlow J (2011) Macro–micro feedback links of water management in South Africa: CGE analyses of selected policy regimes. Agric Econ 42:235–247

    Article  Google Scholar 

  • Hertel TW (1997) Global trade analysis: modeling and applications. Cambridge University Press, New York

    Google Scholar 

  • Hertel TW, Rose S, Tol RSJ (2009) Land use in computable general equilibrium models. Econ Anal Land Use Glob Clim Change Policy 1

    Google Scholar 

  • Huff K, Hertel TW (2001) Decomposing welfare changes in GTAP. GTAP Tech. Pap. No 05. http://www.gtap.agecon.purdue.edu/resources/res_display.asp?RecordID=308. Accessed 18 September 2018

  • Huffman WE (2012) Kahneman’s Psychology of Value: the sixth T. W. schultz lecture. Am J Agric Econ 94:285–290

    Article  Google Scholar 

  • Kim JR, McCuen RH (1979) Factors for predicting commercial water use1. JAWRA J Am Water Resour Assoc 15:1073–1080

    Article  Google Scholar 

  • Liu J, Hertel TW, Taheripour F, Zhu T, Ringler C (2014) International trade buffers the impact of future irrigation shortfalls. Glob Environ Change 29:22–31

    Article  Google Scholar 

  • Luckmann J, Grethe H, McDonald S, Orlov A, Siddig K (2014) An integrated economic model of multiple types and uses of water. Water Resour Res 50(5):3875–3892

    Google Scholar 

  • Masanet E, Walker ME (2013) Energy-water efficiency and U.S. industrial steam. AIChE J 59:2268–2274

    Article  Google Scholar 

  • McDougall R (2003) A new regional household demand system for GTAP. GTAP Tech. Pap

    Google Scholar 

  • McKinsey & Co (2009) Charting our water future: economic frameworks to inform decision-making. 2030 Water Resources Group

    Google Scholar 

  • Mekonnen MM, Hoekstra AY (2011) The water footprint of electricity from hydropower. Hydrol Earth Syst Sci Discuss 8:8355–8372

    Article  Google Scholar 

  • Mekonnen MM, Hoekstra AY (2012) A Global assessment of the water footprint of farm animal products. Ecosystems 15:401–415

    Article  Google Scholar 

  • Nauges C, Whittington D (2012) Estimation of water demand in developing countries http://elibrary.worldbank.org/doi/abs/10.1093/wbro/lkp016?journalCode=wbro. Accessed s2 September 2018

  • OECD (2013) Managing water for green growth

    Google Scholar 

  • Olmstead SM (2013) Climate change adaptation and water resource management: a review of the literature. Energy Econ 46:500–509

    Article  Google Scholar 

  • Peterson D, Dwyer G, Appels D, Fry JM (2005) Econ Rec 81:S115–S127

    Article  Google Scholar 

  • Ponce R, Bosello F, Giupponi C (2012) Integrating water resources into computable general equilibrium models - a survey. Fondazione Eni Enrico Mattei Work, Pap

    Book  Google Scholar 

  • Renzetti S (1992) Estimating the structure of industrial water demands: the case of canadian manufacturing. Land Econ 68:396–404

    Article  Google Scholar 

  • Renzetti S (2002) The economics of industrial water use. Edward Elgar Publishing

    Google Scholar 

  • Ringler C, Cai X (2006) Valuing fisheries and wetlands using integrated economic-hydrologic modeling—Mekong river basin. J Water Resour Plan Manag 132:480–487

    Article  Google Scholar 

  • Rosegrant MW, Ringler C, Msangi S, Sulser TB, Zhu T, Cline SA (2008) International model for policy analysis of agricultural commodities and trade. http://www.ifpri.org/publication/international-model-policy-analysis-agricultural-commodities-and-trade-impact. Accessed 27 September 2018

  • Rosegrant MW, Ringler C, Msangi S, Sulser TB, Zhu T, Cline SA (2012) International model for policy analysis of agricultural commodities and trade (IMPACT): model description. International Food Policy Research Institute (IFPRI), Washington, DC

    Google Scholar 

  • Rosegrant MW, Ringler C, Zhu T, Tokgoz S, Bhandary P (2013) Water and food in the bioeconomy: challenges and opportunities for development. Agric Econ 44:131–150

    Google Scholar 

  • Seckler D, Amarasinghe, U., Molden D, de Silva R, Barker R (1998) World water demand and supply, 1990 to 2025: scenarios and issues. https://ageconsearch.umn.edu/bitstream/61108/2/REPORT19.PDF. Accessed 27 September 2018

  • Siebert S, Burke J, Faures JM, Frenken K, Hoogeveen J, Döll P, Portmann FT (2010) Groundwater use for irrigation–a global inventory. Hydrol Earth Syst Sci Discuss 7:3977–4021

    Article  Google Scholar 

  • Smakhtin VU, Revenga C, Döll P (2004) Taking into account environmental water requirements in global-scale water resources assessments. https://core.ac.uk/download/pdf/6405183.pdf. Accessed 27 September 2018

  • Strzepek K, McCluskey A, Boehlert B, Jacobsen M, Fant IV (2011) Climate variability and change: a basin scale indicator approach to understanding the risk to water resources development and management

    Google Scholar 

  • Taheripour F, Hertel T, Liu J (2013) Introducing water by river basin into the GTAP-BIO model: GTAP-BIO-W. GTAP Work. Pap. No 77. URL http://www.gtap.agecon.purdue.edu/resources/res_display.asp?RecordID=4304. Accessed 27 September 2018

  • Tsigas ME, Gray D, Hertel TW, Krissoff B (2001) Environmental consequences of trade liberalization in the western hemisphere. In: The sustainability of long-term growth: socioeconomic and ecological perspectives. Edward Elgar Publishing, Cheltenham

    Google Scholar 

  • Van Heerden JH, Blignaut J, Horridge M (2008) Integrated water and economic modelling of the impacts of water market instruments on the South African economy. Ecol Econ 66:105–116

    Article  Google Scholar 

  • Wittwer G (ed) (2012) Economic modeling of water: the Australian CGE experience. Springer, Dordrecht, New York

    Google Scholar 

  • Zhu T, Ringler C, Iqbal MM, Sulser TB, Goheer MA (2013) Climate change impacts and adaptation options for water and food in Pakistan: scenario analysis using an integrated global water and food projections model. Water Int 38(5):651–669

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Agricultural Economics, Purdue University, 403 W State Street, West Lafayette, IN, 47907-2056, USA

    Tom Hertel & Jing Liu

Authors
  1. Tom Hertel
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Jing Liu
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Jing Liu .

Editor information

Editors and Affiliations

  1. Centre of Policy Studies, Victoria University, Melbourne, VIC, Australia

    Glyn Wittwer

Rights and permissions

Reprints and permissions

Copyright information

© 2019 Springer Nature Singapore Pte Ltd.

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Hertel, T., Liu, J. (2019). Implications of Water Scarcity for Economic Growth. In: Wittwer, G. (eds) Economy-Wide Modeling of Water at Regional and Global Scales. Advances in Applied General Equilibrium Modeling. Springer, Singapore. https://doi.org/10.1007/978-981-13-6101-2_2

Download citation

  • DOI: https://doi.org/10.1007/978-981-13-6101-2_2

  • Published:

  • Publisher Name: Springer, Singapore

  • Print ISBN: 978-981-13-6100-5

  • Online ISBN: 978-981-13-6101-2

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

Publish with us

Policies and ethics

Search

Navigation