Conference Agenda

Declining water resources under climate change, growing populations, and deteriorating water supply infrastructure impose increasing pressure on urban water supply systems. One billion people already face frequent public water supply interruptions, causing households and firms to rely on alternative modes of water service provision. Such conditions require consistent water demand management approaches across all sectors. Commercial water demand in low- and middle-income countries, however, has so far received scant attention in the econometric literature, despite its growing relevance. One particular challenge for demand estimation in developing countries is the use of multiple water sources. Here, we extend the discrete-continuous choice approach to estimate commercial demand for water from multiple supply sources. We apply the method to analyze the water demand of commercial establishments in water-scarce Jordan, where a highly intermittent public water supply system relies heavily on commercial water users for cost recovery, using survey data. Informal markets for expensive water deliveries via tanker trucks already provide 69.7% of all commercial water supply in Jordan, suggesting severe public water supply shortages. We find that commercial water demand is characterized by a positive output elasticity of 0.4 and by a negative price elasticity of -0.65 across all sources. This high negative price elasticity implies that firms in Jordan and similar settings are more responsive to water pricing policies than households, put poses challenges for water utilities’ cost recovery. Insights into commercial water demand are urgently needed to address the growing water sector challenges affecting cities around the world.

Groundwater is a critical natural resource, yet it is often insufficiently regulated and monitored, leading to unsustainable exploitation. In recent decades, China has seen a rapid depletion of its groundwater reserves. In 2016-2017, China implemented a water tax reform across ten provinces and administrative divisions. One of the primary goals of the reform is to reduce groundwater overdraft by raising the cost of groundwater extraction. This study evaluates the effectiveness of this water tax reform in terms of its effects on reducing groundwater extraction. The study draws on panel data from 177 sub-provincial administrative divisions ('cities') covering the years 2012 to 2021. Using a Difference-in-Differences approach combined with Propensity Score Matching (PSM) to address possible selection bias, results indicate that the water tax reform has reduced groundwater abstraction by about 30 million cubic meters or by about 8%, on average, in those cities in which the tax was implemented. These findings underscore the importance of the tax policy in addressing China’s groundwater challenges and emphasize the need for sustainable water resource governance.

Land subsidence is a slow-moving environmental problem with potentially large long-run economic consequences. While governments have implemented a range of mitigation strategies and policy instruments, the economic valuation of subsidence mitigation remains limited. In particular, causal evidence on whether subsidence mitigation is capitalized into property prices is scarce. In Taiwan, a new reservoir was commissioned to provide more reliable surface supply for Yunlin, a world-renowned land subsidence area. This paper exploits the commission of the reservoir as a quasiexperiment to examine the capitalization of subsidence mitigation. Using geocoded property transaction data merged with spatially detailed subsidence measures from 2014–2020, I estimate a hedonic pricing model within a triple-differences framework to recover the implicit prices of subsidence mitigation. The results show that reductions in subsidence following reservoir’s commission are significantly capitalized into land prices but not building prices. A one-centimeter reduction in cumulative subsidence over the two years preceding a transaction increases land prices by approximately seven percent. The effect is persistent for up to four years and is stronger in lower-income and non-urban areas.

This study utilizes a Computable General Equilibrium (CGE) model, specifically GTAP-AW, to analyze the economic implications of alternative water sectors in addressing natural water scarcity, with a focus on the Mediterranean region. Recognizing the growing water scarcity worsened by climate change, the research incorporates alternative water sources—desalination and treated wastewater—into the economic framework, establishing a direct link with natural water as a primary factor of production. The study offers a thorough evaluation of how shifts in the availability and management of water resources, both natural and alternative, as well as climate-driven changes in land and water productivity, can influence vital sectors and the overall economy, especially under climate-driven water shortages.

The research hypothesizes that, despite higher financial and energy costs, the adoption of alternative water sources in water-scarce areas provides significant social benefits by reducing the impacts of natural water shortages, supporting food security, and sustaining economic growth. Results indicate that under the SSP2–RCP4.5 scenario, decreases in natural water availability and declining irrigation water productivity place strong pressure on agriculture, energy production, and GDP. Nevertheless, when desalination and treated wastewater can substitute for scarce natural water—as in the GTAP-AWH specification—these negative effects are substantially mitigated. The findings emphasize the economic value of alternative water sources and advocate for including detailed technical substitution and innovation capabilities into CGE models to better evaluate the economy-wide potential to substitute capital and other inputs with water.