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The Economic Impact of Increased Water Demand in Australia: A Computable General Equilibrium Analysis
Author(s) -
Ejaz Qureshi Muhammad,
Proctor Wendy,
Young Mike D.,
Wittwer Glyn
Publication year - 2012
Publication title -
economic papers: a journal of applied economics and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.245
H-Index - 19
eISSN - 1759-3441
pISSN - 0812-0439
DOI - 10.1111/j.1759-3441.2011.00160.x
Subject(s) - computable general equilibrium , water scarcity , scarcity , economics , shadow price , water resources , natural resource economics , water supply , demand management , water use , opportunity cost , population , water conservation , supply and demand , agricultural economics , water resource management , environmental science , environmental engineering , microeconomics , macroeconomics , ecology , mathematical optimization , mathematics , demography , sociology , biology
This paper explores the impact of increased population and water demand and reduced water supply on sectoral and regional output and employment in Australia utilising a multi‐regional computable general equilibrium model. The results indicate that the increase in water demand will significantly increase the shadow price (or opportunity cost) of water use in major urban centres. For cities predicted to have high growth rates such as Sydney, Brisbane and Perth, if rising water scarcity had not been supplemented by new water supplies, and if the price of water had reflected rising scarcity, the price of water would have risen by fivefold, sevenfold and eightfold per kilolitre respectively. However, allowing rural–urban water trading and developing new water sources would reduce water scarcity and the opportunity cost of water use and the economic impacts on the Australian economy.