A Water-Embedded CGE Approach to Economic and Welfare Effects of Agricultural Water Transfer

Abstract

Interbasin water transfer projects which are considered as a solution to the water crisis have different economic and environmental implications for regions. This study investigated the economic and welfare effects of agriculture water transfer to Qazvin Province in Iran using a water-embedded computable general equilibrium (CGE) model. The model was calibrated and solved numerically using a water-embededd social accounting matrix (WSAM). A scenario transferring 290 million m3 of water was simulated. The results indicate that this policy had a positive effect on the region’s welfare and increased the gross production of the agricultural sector by 14.4%, which led to an increase in the production inputs and added value of the agricultural sector. With the increase in gross production, the exports of the agricultural sector increased and the need for imports decreased. With the change of variables in the agricultural sector, other economic sectors were affected directly and indirectly. The economic variables of Qazvin province—gross domestic product (GDP), capital formation, exports of agricultural products, industries, and service efficiency—had a positive response to the policy.