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Title:The economic impact of the South-North water transfer project in China: A computable general equilibrium analysis PDF Logo
Authors:Berrittella, Maria
Rehdanz, Katrin
Tol, Richard S. J.
Issue Date:2006
Series/Report no.:FEEM Working Papers 2006,154
Abstract:Water resources are unevenly spread in China. Especially the basins of the Yellow, Hui and Hai rivers in the North are rather dry. To increase the supply of water in these basins, the South-to-North Water Transfer project (SNWT) was launched. Using a computable general equilibrium model this study estimates the impact of the project on the economy of China and the rest of the world. We contrast three alternative groups of scenarios. All are directly concerned with the South-to-North water transfer project to increase water supply. In the first group of scenarios additional supply implies productivity gains. We call it the non-market” solution. The second group of scenarios is called market solution”. The market price for water adjusts such that supply and demand are equated again. In the third group of simulations the economic implications of China’s capital investment in infrastructure for the water South-North water transfer project is analyzed. Finally, the investment is combined with the increased capacity of water. If an increase in water supply in China leads to an increase in productivity of their water-intensive goods and services (non-market solution) this would result in a huge positive welfare effect from increased production and export. The effect on China's welfare would still be positive, if a market for water would exist (market solution), but the world as a whole would lose. The negative effect for the rest of the world is largely explained by a deterioration of its terms-of-trade. Well functioning water markets in China are unlikely to exist.
Subjects:Computable General Equilibrium
South-North Water Transfer Project
Water Policy
Water Scarcity
JEL:D58
Q25
R13
Q28
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des IfW
FEEM Working Papers, Fondazione Eni Enrico Mattei

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