The reform of water management in China is still in progress, and the pricing of water resources is undertaken in parallel, with a divide between irrigation water and pipe water associated with different users: The supply of irrigation water is regulated by local government and that of pipe water is operated by the production sector of pipe water. Based on a literature review and an interview survey of farmers, this study incorporated the water parallel pricing system of China within a computable general equilibrium (CGE) model, where the drought of 2000 is simulated. The 16 provincial irrigation water supplies and their subsidies were also estimated and introduced into this CGE model. The results demonstrated that the effects on the macro-economy were insignificant. However, the effects

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This study empirically identifies the impact of global-warming-induced climate change on Japan's agricultural production using panel data. First, we constructed panel data; combining time-series data from 1995 to 2006 for a cross-section of eight regions in Japan. Next, we conducted a static panel data analysis, using a function for agricultural products incorporating labor and three weather variables (temperature, solar radiation, and precipitation.) From the estimation results of the production function, we selected the production function with the aforementioned labor and weather variables and found that the rising temperatures and precipitation and falling solar radiation caused by climate change have reduced the rice production, while rising temperatures and precipitation have reduced the vegetable and potato production in Japan. Second, we conducted dynamic panel data analysis, using a production function for agricultural products incorporating labor, a one-period lagged output, and the same three weather variables. Based on the estimation results of the dynamic panel data model, we selected the production function for agricultural products using only the labor and three weather variables and found the same results for both the rice production and vegetable and potato production in Japan. Based on the estimated results of the static and dynamic-panel data models for variable mean annual temperature, which serves as a proxy for climate change, we concluded that an increase of 1°C in mean annual temperature would reduce rice production by 5.8% in the short term and 3.9% in the long term, and vegetables and potatoes productions by 5.0% and 8.6% in the short term and long term, respectively.

There have been many droughts in China that have caused severe losses. Previous studies evaluating droughts were from meteorological and hydrological perspectives. We measure the Chinese drought of 2000 based on a static computable general equilibrium model of China's macroeconomy, which describes the relationships between drought, agricultural production, and rural households' welfare from an economic perspective. In the model, the irrigation water inputs of the 16 regions of China are estimated and combined with the same regions' cropland inputs. Thus, the drought is simulated as an external impact by reducing the productivity of different crops in different regions. The reductions in 10 crop outputs and the rural households' welfare, total consumption and food consumption from 16 regions are more severe than those from a perfect market reaction. The findings herein are also distinct in that the five rural households that suffer most as a result of drought are from southern areas. The results provide an available reference for the Chinese government's decision on what measures to take to prevent drought and its impacts. The model can be further improved by incorporating meteorological and hydrological models to identify droughts using more accurate indexes.

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