Water and Economy-Wide Policy Interventions

Water is a limiting factor for sustainable economic growth and development in many countries. Its allocation has significant impacts on overall economic efficiency, particularly with growing physical scarcity in certain regions. Water also has become a strategic resource, involving conflicts among those who may be affected differently by various policies. This monograph reviews work that models various policy interventions aimed at improving water allocation decisions with an economy-wide context. It focuses on the "macro–micro linkage" framework that facilitates assessment of various linkages among policies and their impacts within individual sectors and the economy. Drawing on country-based studies in Morocco, South Africa, Turkey, and Mexico, the analysis reveals difficult tradeoffs among various policy objectives, including priorities placed on different sectors, regional advantages, and general economic efficiency gains versus broader social impacts. The comparison of policy impacts demonstrates how policy makers can use such information to rank the policy interventions according to the emphasis placed on their objectives. The monograph also compares approaches used in other economy-wide studies that apply computable general equilibrium models in various contexts of water, environment, and agriculture.