When Water is no Longer Heaven Sent: Comparative Pricing Analysis in an AGE Model

Bernard Decaluwe (), A. Patry and Luc Savard

Cahiers de recherche from Université Laval - Département d'économique

Abstract:

In this paper we present a applied general equilibrium model with special features that allows for comparative analysis of different pricing scheme. We look at Boiteux-Ramsey Pricing, Marginal Cost Pricing as well as an arbitrary water pricing increase for the agriculture sectors. A standard AGE was adapted by explicitly modeling water production with its different technologies, water demand by different users also needed to be refined since they are generally modeled with fixed coefficient with no substitution allowed. Results show that the choice of applying one policy over another can rely on the water management authorities (or government)objectives. If considering economic efficiency and water conservation the Boiteux-Ramsey pricing seems to be the best alternative. Moreover, we show that BRP become more clearly advantageous vs MCP the more rigid (small capacities to substitute water for other inputs) the economy's agents.

Keywords: Water; Taxation; Incidence; Computable General Equilibrium Model; Boiteux-Ramsey Pricing; Marginal Cost Pricing (search for similar items in EconPapers)
JEL-codes: C68 H21 Q25 Q26 (search for similar items in EconPapers)
Date: 1999
New Economics Papers: this item is included in nep-agr, nep-env and nep-mic
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Citations: View citations in EconPapers (33)

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Related works:
Working Paper: `When Water Is No Longer Heaven Sent: Comparative Pricing Analysis in an AGE Model (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:lvl:laeccr:9908

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