TY - JOUR
T1 - Modeling the short-run costs of changes in water availability in a desert city
T2 - a modified input-output approach
AU - Yoo, James
AU - Perrings, Charles
N1 - Funding Information:
This work was supported by the National Science Foundation [grant number 0836046].
Publisher Copyright:
© 2016 Informa UK Limited, trading as Taylor & Francis Group.
PY - 2017/7/4
Y1 - 2017/7/4
N2 - This paper investigates the impact of change in sectoral water supply on employment, value-added output, and indirect business tax, in Maricopa County, Arizona using input–output model. We developed extended modified input–output approach that incorporates each source of water as a separate sector, and that allows for substitution between water sources, and estimated the economic impact of a change in surface water supplies under two scenarios. Scenario I assumes that total water supply/use decreases by 1%, but the reduction comes only from surface water use, holding groundwater use constant. Scenario II assumes that surface water supply/use in all industries decreases by 1%, and the reduction in surface water use is replaced by the exact amount of more expensive groundwater. We found that the magnitude of economic impact depends on consumer’s responsiveness to water price change. When price elasticity of water demand is relatively low (≤0.2), the economic impact of a 1% reduction in surface water supplies was smaller than under the first scenario. However, the more water users in all industries are responsive to a change in water price, the bigger are economic impacts in terms of reductions in jobs, value added, and indirect business taxes.
AB - This paper investigates the impact of change in sectoral water supply on employment, value-added output, and indirect business tax, in Maricopa County, Arizona using input–output model. We developed extended modified input–output approach that incorporates each source of water as a separate sector, and that allows for substitution between water sources, and estimated the economic impact of a change in surface water supplies under two scenarios. Scenario I assumes that total water supply/use decreases by 1%, but the reduction comes only from surface water use, holding groundwater use constant. Scenario II assumes that surface water supply/use in all industries decreases by 1%, and the reduction in surface water use is replaced by the exact amount of more expensive groundwater. We found that the magnitude of economic impact depends on consumer’s responsiveness to water price change. When price elasticity of water demand is relatively low (≤0.2), the economic impact of a 1% reduction in surface water supplies was smaller than under the first scenario. However, the more water users in all industries are responsive to a change in water price, the bigger are economic impacts in terms of reductions in jobs, value added, and indirect business taxes.
KW - Price elasticity of water demand
KW - a modified input–output model
KW - water supply
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U2 - 10.1080/02692171.2016.1271977
DO - 10.1080/02692171.2016.1271977
M3 - Article
AN - SCOPUS:85007432897
SN - 0269-2171
VL - 31
SP - 549
EP - 564
JO - International Review of Applied Economics
JF - International Review of Applied Economics
IS - 4
ER -