Analyzing Future Water Scarcity in Computable General Equilibrium Models

Jing Liu, Thomas Hertel and Farzad Taheripour
Additional contact information
Jing Liu: Department of Agricultural Economics, Purdue University, USA
Farzad Taheripour: Department of Agricultural Economics, Purdue University, USA

Water Economics and Policy (WEP), 2016, vol. 02, issue 04, 1-30

Abstract: Incorporating water into a computable general equilibrium (CGE) model operating at global scale can be extremely demanding due to the absence of standardized data, the sheer dimensions caused by intersecting river basins with countries, and difficulties to model demand for and supply of water. This has led many authors to introduce water in their CGE modeling framework in different ways and at different spatial and sectoral aggregation levels. Of course, simplifying market for water and sacrificing the geographical realism risk introducing errors caused by inappropriate aggregation. In this paper, we use an elaborate global CGE model to investigate the three most commonly practiced simplifications: (1) tackling global questions in a national level model; (2) collapsing irrigated and rainfed crop production into a single sector; and (3) removing river basin boundaries within a country. In each case, we compare their performance in predicting the impacts of future irrigation scarcity on international trade, crop output, land use change and welfare, relative to the full scale model. As might be expected, the single region model does a good job of matching outcomes for that region, although changes in bilateral trade can entail significant errors. When it comes to the elimination of sub-national river basins and irrigation location, we find that, if the research question has to do with changes in national-scale trade, production and welfare changes, it may be sufficient to ignore the sub-national hydrological boundaries in global economic analysis of water scarcity. However, when decision makers have an interest in the distribution of inputs and outputs within a region, preserving the river basin and sectoral detail in the model brings considerable added value to the analysis.

Keywords: Computable general equilibrium; model comparison; sectoral and spatial aggregation; irrigation scarcity (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S2382624X16500065
Access to full text is restricted to subscribers

Related works:
Working Paper: Analyzing Future Water Scarcity in Computable General Equilibrium Models (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:wepxxx:v:02:y:2016:i:04:n:s2382624x16500065

Ordering information: This journal article can be ordered from

DOI: 10.1142/S2382624X16500065

Access Statistics for this article

Water Economics and Policy (WEP) is currently edited by Ariel Dinar

More articles in Water Economics and Policy (WEP) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().