Economics at your fingertips  

Welfare Implications of Water Scarcity: Higher Prices of Desalination

Yiğit Sağlam ()
Additional contact information
Yiğit Sağlam: Victoria University of Wellington

Environmental & Resource Economics, 2019, vol. 73, issue 4, 995-1022

Abstract: Abstract In this paper, we evaluate the welfare implications of shortages in renewable resources, and investigate the effects of cross-subsidization on these shortages. We set up a stochastic dynamic programming model in which a benevolent supplier allocates the resource for multiple user groups subject to revenue and resource constraints. The supplier also has access to an external source that can be utilized at a certain cost. The solution to the model gives the “optimal” sectoral prices, and demand for the external source. We find out that saving budget surplus during periods of scarcity allows the planner to charge prices below average costs when the resource is abundant. Using data from Turkey, we simulate our dynamic model to quantify the implications of cross-subsidization on water use across user groups.

Keywords: Renewable resource; Water shortages; Stochastic dynamic programming; Desalination; Cross-subsidization (search for similar items in EconPapers)
JEL-codes: D12 H21 Q15 Q25 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
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:

Ordering information: This journal article can be ordered from
http://www.springer. ... al/journal/10640/PS2

Access Statistics for this article

Environmental & Resource Economics is currently edited by Ian J. Bateman

More articles in Environmental & Resource Economics from Springer, European Association of Environmental and Resource Economists Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().

Page updated 2019-11-06
Handle: RePEc:kap:enreec:v:73:y:2019:i:4:d:10.1007_s10640-018-0284-2