Can a water market avert the "double-whammy" of trade reform and lead to a "win-win" outcome?

Xinshen Diao, Terry Roe

Research output: Contribution to journalReview articlepeer-review

42 Scopus citations

Abstract

This paper focuses on the linkages between water and trade policies, using Morocco as a case. This country is typical of many in that policy protects its import competing agricultural and industrial sectors while water in irrigated agriculture is priced below its marginal value product. Changing water policy without correcting for these other distortions leads to a more inefficient allocation of water. On the other hand, reforming trade policy alone can make farmers growing crops protected pre-reform worse off. Using an intertemporal, applied general equilibrium model, we find that trade reform actually creates an opportunity to pursue water policy reform. Creating a water user-rights market post trade reform not only compensates for the decline in farmers' profits caused by the trade reform, but also raises the efficiency of water allocation and hence benefits the economy as a whole.

Original languageEnglish (US)
Pages (from-to)708-723
Number of pages16
JournalJournal of Environmental Economics and Management
Volume45
Issue number3
DOIs
StatePublished - May 2003

Keywords

  • General equilibrium
  • Trade reform
  • Water markets

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