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Analyzing Future Water Scarcity in Computable General Equilibrium Models

Author

Listed:
  • Jing Liu

    (Department of Agricultural Economics, Purdue University, USA)

  • Thomas Hertel

    (Department of Agricultural Economics, Purdue University, USA)

  • Farzad Taheripour

    (Department of Agricultural Economics, Purdue University, USA)

Abstract
Incorporating water into a computable general equilibrium (CGE) model operating at global scale can be extremely demanding due to the absence of standardized data, the sheer dimensions caused by intersecting river basins with countries, and difficulties to model demand for and supply of water. This has led many authors to introduce water in their CGE modeling framework in different ways and at different spatial and sectoral aggregation levels. Of course, simplifying market for water and sacrificing the geographical realism risk introducing errors caused by inappropriate aggregation. In this paper, we use an elaborate global CGE model to investigate the three most commonly practiced simplifications: (1) tackling global questions in a national level model; (2) collapsing irrigated and rainfed crop production into a single sector; and (3) removing river basin boundaries within a country. In each case, we compare their performance in predicting the impacts of future irrigation scarcity on international trade, crop output, land use change and welfare, relative to the full scale model. As might be expected, the single region model does a good job of matching outcomes for that region, although changes in bilateral trade can entail significant errors. When it comes to the elimination of sub-national river basins and irrigation location, we find that, if the research question has to do with changes in national-scale trade, production and welfare changes, it may be sufficient to ignore the sub-national hydrological boundaries in global economic analysis of water scarcity. However, when decision makers have an interest in the distribution of inputs and outputs within a region, preserving the river basin and sectoral detail in the model brings considerable added value to the analysis.

Suggested Citation

  • Jing Liu & Thomas Hertel & Farzad Taheripour, 2016. "Analyzing Future Water Scarcity in Computable General Equilibrium Models," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 2(04), pages 1-30, December.
    • Handle: RePEc:wsi:wepxxx:v:02:y:2016:i:04:n:s2382624x16500065
    DOI: 10.1142/S2382624X16500065
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    2. Erwin Corong & Thomas Hertel & Robert McDougall & Marinos Tsigas & Dominique van der Mensbrugghe, 2017. "The Standard GTAP Model, version 7," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 2(1), pages 1-119, June.
    3. Bagstad, Kenneth J. & Ancona, Zachary H. & Hass, Julie & Glynn, Pierre D. & Wentland, Scott & Vardon, Michael & Fay, John, 2020. "Integrating physical and economic data into experimental water accounts for the United States: Lessons and opportunities," Ecosystem Services, Elsevier, vol. 45(C).
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    5. Nechifor, Victor, 2018. "Global economic and food security impacts of demand-driven water scarcity," Conference papers 332931, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. Kirby Ledvina & Niven Winchester & Kenneth Strzepek & John M. Reilly, 2018. "New Data for Representing Irrigated Agriculture in Economy-Wide Models," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 3(1), pages 122-155, June.
    7. Dario Aversa & Nino Adamashvili & Mariantonietta Fiore & Alessia Spada, 2022. "Scoping Review (SR) via Text Data Mining on Water Scarcity and Climate Change," Sustainability, MDPI, vol. 15(1), pages 1-13, December.

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