Water shortages, intersectoral water allocation and economic growth: the case of China

Abstract

Purpose – The purpose of this paper is to investigate the economic impacts of intra- and inter-regional water reallocation on sectoral transformation and economic growth. Design/methodology/approach – A multi-sector, Ramsey-type growth model is fit to Chinese data and used to perform policy experiments. Findings – An intra-regional water reallocation increases per capita gross domestic product (GDP) by about 1.5 percent 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 negligible impact on per capita GDP over the period 2000-2060, but aggregate welfare increases by 557.23 billion RMB. Combining intra-regional and inter-regional water reallocations, on average, increases per capita GDP by 0.38 percent per year over the period and the aggregate welfare gain from this combination is 1148.06 billion RMB. Each policy scenario has implications for long-run regional production patterns: In an intra-regional reallocation scenario, Southern China produces almost 70 percent of aggregate GDP, in the inter-regional transfer it produces 58 percent of aggregate GDP, while in a combined intra/inter-regional reallocation it produces 55 percent of aggregate GDP. Originality/value – This analysis can serve as a template for developing a useful planning tool that one can fit to national or regional data and use to examine a variety of policy relevant questions.

Quantifying Water Scarcity in Northern China Within the Context of Climatic and Societal Changes and South‐to‐North Water Diversion

“…Previous studies of the SNWD project mainly focused on its impact on groundwater resources (Liang et al, 2019; Ye et al, 2014) and energy reductions (Zhao et al, 2017), its effect on phytoplankton (Chen et al, 2018; Zeng et al, 2015), and hydrological nitrogen and phosphorus pollution (Zhao et al, 2019), as well as the pricing system and water allocation schemes and policies (Du et al, 2019; Pohlner, 2016). However, very few studies have discussed the economic impacts of the SNWD within the context of climatic and societal change (Berkoff, 2003; Fang et al, 2015).…”

A Review of the Economic, Social, and Environmental Impacts of China’s South–North Water Transfer Project: A Sustainability Perspective

“…According to Berkoff [4], the World Bank model assumes that increasing efficiency for the largest water user (irrigation) has negative economic returns, whereas the World Wildlife Fund report argues that significant potential for increased water-use efficiency remains, suggesting that within-basin water management is a key component in evaluating the economic viability of the SNWTP. This was echoed in more recent analysis by Fang et al [28], who found that the SNWTP's cost effectiveness was at least partially dependent on within-basin water allocation. Crow-Miller [29], however, pointed out that leaders within the central government see the SNWTP as economic-growth enabling, which implicitly endorses the view that water scarcity is limiting growth on the NCP.…”

Water demand elasticities under risk conditions

“…The framework is applied for optimization of agricultural water and land resources in the middle reaches of “Heihe” River basin in China. Fang et al (2015) investigated the economic impacts of intra- and inter-regional water reallocation on sectoral transformation and economic growth. Others, such as Veintimilla-Reyes et al (2016) considered the water allocation problem as a network flow optimization problem that can possibly be solved by a spatio-temporal optimization approach using mixed integer LP techniques.…”