Centralized water management under lobbying: Economic analysis of desalination in Israel

Ziv Bar-Nahum, Ami Reznik, Israel Finkelshtain and Iddo Kan

Ecological Economics, 2022, vol. 193, issue C

Abstract: This paper studies the impact of lobbying on policies in a centrally managed water economy. First, we develop an optimal control model in which long-run water-management policies are an outcome of negotiation between policymakers and a politically organized farming sector. We show that under equilibrium conditions in the political game, larger political power of the farmers' lobby leads to faster exhaustion of naturally replenished water resources, and expedites the investment in water-supply backstop technologies such as desalination. Then, we employ a detailed hydro-economic model of Israel's water economy to assess the validity of claims by scientists and bureaucrats that lobbying by the local agricultural sector has contributed to the depletion of the country's natural freshwater resources and thus accelerated the development of seawater desalination. Specifically, we compare observed trajectories of water-management policies in the years 2000–2020 to their simulated counterparts, and find a better fit for simulated scenarios that involve lobbying than for a socially optimal one; this result prevails under simulated conditions of extreme water shortage due to faster population growth or lower recharge of natural water sources. The best-fitted political-equilibrium scenarios indicate considerable deadweight loss. We discuss potential causes of over- and undervaluation of the lobbying effect.

Keywords: Economics; Water management; Lobbying; Desalination; Irrigation; Model (search for similar items in EconPapers)
JEL-codes: D72 Q15 Q25 Q28 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:193:y:2022:i:c:s0921800921003797

DOI: 10.1016/j.ecolecon.2021.107320

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