Abstract

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.

Original languageEnglish (US)
Pages (from-to)1-16
Number of pages16
JournalInternational Review of Applied Economics
DOIs
StateAccepted/In press - Dec 30 2016

Fingerprint

Costs
Water
Short-run
Water supply
Modeling
Economic impact
Scenarios
Business taxes
Water use
Industry
Value added
Water price
Ground water
Responsiveness
Substitution
Price changes
Price elasticity
Water demand

Keywords

  • a modified input–output model
  • Price elasticity of water demand
  • water supply

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

@article{8babf807eb2e4c6ba5209b4e028d1c93,
title = "Modeling the short-run costs of changes in water availability in a desert city: a modified input-output approach",
abstract = "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.",
keywords = "a modified input–output model, Price elasticity of water demand, water supply",
author = "James Yoo and Charles Perrings",
year = "2016",
month = "12",
day = "30",
doi = "10.1080/02692171.2016.1271977",
language = "English (US)",
pages = "1--16",
journal = "International Review of Applied Economics",
issn = "0269-2171",
publisher = "Routledge",

}

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

PY - 2016/12/30

Y1 - 2016/12/30

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 - a modified input–output model

KW - Price elasticity of water demand

KW - water supply

UR - http://www.scopus.com/inward/record.url?scp=85007432897&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85007432897&partnerID=8YFLogxK

U2 - 10.1080/02692171.2016.1271977

DO - 10.1080/02692171.2016.1271977

M3 - Article

SP - 1

EP - 16

JO - International Review of Applied Economics

JF - International Review of Applied Economics

SN - 0269-2171

ER -