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

Author

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  • Decaluwé, B.
  • Patry, A.
  • Savard, L.

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.

Suggested Citation

  • Decaluwé, B. & Patry, A. & Savard, L., 1999. "When Water is no Longer Heaven Sent: Comparative Pricing Analysis in an AGE Model," Cahiers de recherche 9908, Université Laval - Département d'économique.
    • Handle: RePEc:lvl:laeccr:9908
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    File URL: http://www.ecn.ulaval.ca/w3/recherche/cahiers/1999/9908.pdf
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    Keywords

    Water; Taxation; Incidence; Computable General Equilibrium Model; Boiteux-Ramsey Pricing; Marginal Cost Pricing;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q26 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Recreational Aspects of Natural Resources
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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