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Water Shortages, Water Allocation and Economic Growth: The Case of China

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  • Fang, Xiangming
  • Roe, Terry L.
  • Smith, Rodney B.W.

Abstract

Current projections indicate that by 2025, water scarcity will affect over one quarter of the world’s population. This suggests that the need to manage water more efficiently will become more pressing during the next few years as the demand for water increases along with the expansion of economies and their populations. This paper investigates the economic impacts of efficient intraregional and/or inter-regional water reallocation, and examines their corresponding economic gains. A Ramsey-type growth model of a small, open, competitive economy is fitted to year 2000 Chinese data andthe empirical model is used to perform policy experiments. Within region water reallocation increases per-capita Chinese GDP by about 1.5% per year over the period 2000-2060. The aggregate potential welfare gain due to this reallocation is 1002.51 billion RMB. Transferring water from southern to northern China via the South-North Water Transfer Project, on average, has a smaller impact on per-capita GDP over the period 2000-2060, with an aggregate welfare gain of 557.23 billion RMB. Combining intra-regional and inter-regional water reallocations, on average, increases per-capita GDP by 0.38% per year over the period and the aggregate welfare gain from this combination is 1148.06 billion RMB.

Suggested Citation

  • Fang, Xiangming & Roe, Terry L. & Smith, Rodney B.W., 2006. "Water Shortages, Water Allocation and Economic Growth: The Case of China," Conference Papers 6629, University of Minnesota, Center for International Food and Agricultural Policy.
    • Handle: RePEc:ags:umcicp:6629
    DOI: 10.22004/ag.econ.6629
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    References listed on IDEAS

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    1. Edward B. Barbier, 2004. "Water and Economic Growth," The Economic Record, The Economic Society of Australia, vol. 80(248), pages 1-16, March.
    2. Hong Yang & Alexander Zehnder, 2001. "China's Regional Water Scarcity and Implications for Grain Supply and Trade," Environment and Planning A, , vol. 33(1), pages 79-95, January.
    3. ., 1998. "Dynamics," Chapters, in: Heinz D. Kurz & Neri Salvadori (ed.), The Elgar Companion to Classical Economics, volume 0, chapter 42, Edward Elgar Publishing.
    4. Alwyn Young, 2003. "Gold into Base Metals: Productivity Growth in the People's Republic of China during the Reform Period," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1220-1261, December.
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    Cited by:

    1. Changbo Qin & Z.(Bob) Su & Hans Th.A. Bressers & Yangwen Jia & Hao Wang, 2013. "Assessing the economic impact of North China's water scarcity mitigation strategy: a multi-region, water-extended computable general equilibrium analysis," Water International, Taylor & Francis Journals, vol. 38(6), pages 701-723, October.

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