## Abstract

Despite the importance of groundwater in the economy of the Hai River Basin (HRB), falling water tables and ** salinization** of aquifers are both occurring in the region. Hydrological and hydrogeological studies have shown that increases in the salinization of parts of the freshwater aquifers are closely related to the extraction of groundwater. This study uses a framework that considers the interaction between water quantity and quality to examine how the presence of the prehistoric saline water layer affects groundwater management. Simulation results show that in a region where there is a salinization problem like in the HRB, it is optimal to pump at high rates in the early stage of extraction when the quality of groundwater is high. It is then optimal to reduce the pumping rate rapidly as the quality of groundwater deteriorates. Given this characteristic of the optimal pumping path, the heavy extraction currently observed in the HRB does not necessarily indicate that groundwater resources are being overused. However, unregulated extraction by non-cooperative users would eventually cause both the depletion of the water resource and the deterioration of water quality. Hence, joint quantity–quality management is required in the HRB. The study also shows that benefits to groundwater management are higher and costs are lower in regions with salinization problems.

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## Notes

- 1.
Pumping lift is defined as the depth from the ground surface to groundwater.

- 2.
In practice, what determines the level of the water table is the actual water consumption, not pumping rates. In most uses of groundwater, some of the water pumped is returned to the groundwater system. The only water that does not return to the aquifer is what evapotranspires from crops and soils. The part of evapotranspiration is the actual water consumption. Pumping rates may be irrelevant to the level at which a water table stabilizes. For example, Kendy (2003) shows that pumping decreases in some counties in Hebei province by more than 50%, yet the water table declines at the same rate over years. The modeling in this study also reflects this fact.

- 3.
The benefit and cost function are separate in the net benefit function. Since

*E*_{t}only enters the benefit function and*h*_{t}only enters the cost function, the cross-derivative,*f*_{Eh}, is zero. - 4.
In the 2004 China Water Institutions and Management Survey, the enumeration team collected data in 24 communities in Hebei province. In order to guarantee an adequate sample of communities in each of several water usage situations, the communities were chosen randomly from three randomly selected counties according to location, which in the Hai River Basin often is correlated with water scarcity levels. Xian County is located along the coastal belt (the most water scarce area of China); Tang County is located along the inland belt (an area with relatively abundant water resources that are next to the hills and mountains that rise in the eastern part of Hebei province); and Ci County is located in the region between the coastal and inland belts. The survey was conducted by interviewing three different types of respondents in each community (or village): the community leader; well manager (typically three randomly selected well managers per community); and households (four randomly selected households). We use separate questionnaires for each type of respondents. Although most of the data in the analysis come from the household questionnaire, we also use some data from the community leader and well manager questionnaires. Two major blocks of data are used from the household survey: data on household production activities and data on household water use.

- 5.
In simulations, the benefit function is parameterized using values from the year before.

- 6.
Darcy’s Law states that the volume discharge

__rate__*Q*is directly proportional to the head drop*h*_{1}−*h*_{2}and to the cross-section area*A*, but it is inversely proportional to the length difference,*L*(Wang and Anderson 1995): \(Q = - KA\frac{{h_{1} - h_{2} }}{L}\) where*K*is the hydraulic conductivity of the medium (e.g., clay or sand). The negative sign signifies that groundwater flows in the direction of head loss. - 7.
\(Q_{t} - Q_{t + 1} = \frac{{KAc_{1} }}{b}h_{t} + \frac{{KAc_{2} }}{Asb}Q_{t} - \frac{KA}{b}(d_{1} - d_{2} )\) => \(Q_{t + 1} = (1 - \frac{{KAc_{2} }}{Asb})Q_{t} - \frac{{KAc_{1} }}{b}h_{t} + \frac{KA}{b}(d_{1} - d_{2} )\) => \(Q_{t + 2} = (1 - \frac{{KAc_{2} }}{Asb})Q_{t + 1} - \frac{{KAc_{1} }}{b}h_{t + 1} + \frac{KA}{b}(d_{1} - d_{2} )\) => \(Q_{t + 1} - Q_{t + 2} = (1 - \frac{{KAc_{2} }}{Asb})(Q_{t} - Q_{t + 1} ) + \frac{{KAc_{1} }}{b}(h_{t + 1} - h_{t} )\).

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## Appendices

### Appendix 1. Derivative of the Equation of Motion for the Groundwater Salinity Level (*E*_{t})

In this study, we simplify our analysis by only focusing on the case when the saline water moves into the deep aquifer. In Fig. 6, the extraction of deep aquifer water, *Mw*_{t}, leads to an increase in the depth-to-water in the deep aquifer, *h*_{t}. The hydraulic head in the deep aquifer, *H*_{1}, keeps declining as a result. When the pressure difference between the head in the saline water layer, *H*_{2}, and that in the deep aquifer is large enough, the saline water can move into the deep aquifer through the aquitard. The movement of saline water in response to the change in the head difference, *Q*_{12}, accounts for the phenomenon of increasing salinity level in the deep aquifer.

In the language of hydrology, Darcy’s Law can be employed to formalize the movement of saline water.^{Footnote 6} Suppose the hydraulic head of the deep aquifer is linear in the depth-to-water: \(H_{1t} = - c_{1} h_{t} + d_{1}\) and \(H_{2t} = c_{2} \frac{{Q_{t} }}{As} + d_{2}\), where *Q*_{t} is the stock of the saline water, *A* is the area of saline water layer, and *s* is the specific yield, the volume of saline water that moves into the deep aquifer __at time__ * t* can be expressed as

where *K* is the hydraulic conductivity of the aquitard (unit: volume per unit of time), and *b* is the thickness of the aquitard. From (7), we have *Q*_{t} − *Q*_{t+1} ∝ *h*_{t+1} − *h*_{t}.^{Footnote 7} We assume that the change in the level of salinity, *E*_{t+1} − *E*_{t}, is proportional to the total amount of intruded saline water at time *t*, *Q*_{12}. Hence, we have *E*_{t+1} − *E*_{t} ∝ *h*_{t+1} − *h*_{t}. Suppose *E*_{t+1} − *E*_{t}= *δ*(*h*_{t+1} − *h*_{t}), we obtain the equation of motion for *E*_{t}:

*E*_{t+1} = *E*_{t} + (*h*_{t+1} − *h*_{t})

### Appendix 2. Derivation of the Euler Equation for the Cooperative Extraction Model

We rewrite (2) as

The first-order condition for this problem gives:

Lagging (8) by one period gives:

Plugging (8) and (11) into (12) gives:

Rolling equation (11) forward one period gives:

Leading it forward into infinite future, we obtain

Since β is the discount factor that is well within the range of 0 and 1, (13) gives

### Appendix 3. Derivation of Proposition 1

At the steady state, *w*_{t-1}= *w*_{t}= *w∗*. We use *w*^{*}, *E*^{*}, and *h*^{*}to denote the value at the steady state. Equation (14) now becomes:

Using the implicit function theorem gives:

We have *f*_{E} < 0, 1− > 0, *f*_{wh}< 0 and *f*_{hh}< 0. Therefore,

### Appendix 4. Derivation of Proposition 2

Bellman equation for problem s(2) is:

Using the Envelope Theorem gives:

\(V_{\delta } = \beta V_{{E^{\prime}}} (h^{\prime},\;E^{\prime}) \cdot (h^{\prime} - h)\) ⇒ \(V_{\delta } < 0\) since \(V_{{E^{\prime}}} < 0\) and \(h^{\prime} > h\).

### Appendix 5. Derivation of the Euler Equation for Non-cooperative Extraction Model

we rewrite (4) as

The first-order condition for this problem gives:

Using the same manipulations as in the steps to obtain the Euler equation for the cooperative model, we obtain:

Rolling equation (19) forward one period and continuing to substitute for terms in *t *+ 1 gives:

which as *s* goes to infinity becomes

### Appendix 6. Derivation of Proposition 2: Over-Extraction Under Non-cooperative Extraction

Applying the implicit function theorem to (16) gives

\(\frac{{\partial w_{t}^{*} }}{{\partial h_{t} }} = - \frac{{f_{wh} }}{{f_{ww} }} = - \frac{( - )}{( - )} < 0\) and \(\frac{{\partial w_{t}^{*} }}{{\partial E_{t} }} = - \frac{{f_{wE} }}{{f_{ww} }} = - \frac{( - )}{( - )} < 0\).

Therefore the term, \(\phi_{1} \sum\nolimits_{j \ne i}^{M} {\left( {\frac{{\partial w_{j}^{*} }}{{\partial h_{t} }} + \frac{{\partial w_{j}^{*} }}{{\partial E_{t} }}} \right)}\), is negative.

Given the same depth-to-water and the same salinity level, the right-hand side of (5) is lower than that of (3). Consequently, *w*_{it-1} >* w*_{t-1} since *f*_{ww} < 0.

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Huang, Q., Rozelle, S.D., Howitt, R.E., Wilen, J.E. (2019). Optimal Allocation of Groundwater Resources: Managing Water Quantity and Quality. In: Msangi, S., MacEwan, D. (eds) Applied Methods for Agriculture and Natural Resource Management. Natural Resource Management and Policy, vol 50. Springer, Cham. https://doi.org/10.1007/978-3-030-13487-7_6

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