The Economics of Water Scarcity

Jon Frost, Carlos Madeira and Serafin Martinez Jaramillo

No 11261, Policy Research Working Paper Series from The World Bank

Abstract: In many countries around the world, water scarcity could become a macroeconomically relevant concern. As a key input into production processes (agriculture, power generation, and industrial use) and a common good, water resources risk being overexploited. Regressions with panel data for 169 countries between 1990 and 2020 show that, while water use is positively correlated with output, higher water scarcity is associated with lower gross domestic product growth and investment, and higher inflation. In contrast, water use efficiency is associated with higher gross domestic product growth and lower inflation. Climate scenarios show risks of much more severe water shortages in the future, threatening its sustainable use. This could impose higher costs on individual sectors and on the economy, reducing output and pushing up prices. Water availability and use could thus become an area for economists and central banks to monitor in the context of climate change, economic forecasting and monetary policy.

Date: 2025-11-17
New Economics Papers: this item is included in nep-env
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://documents.worldbank.org/curated/en/0994575 ... d27-956ad3a26c2f.pdf (application/pdf)

Related works:
Working Paper: The economics of water scarcity (2025)
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:wbk:wbrwps:11261

Access Statistics for this paper

More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Roula I. Yazigi ().