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Journal of Economic Integration 2008 September;23(3) :631-655.
The Impact of Trade Liberalization on Water Use: A Computable General Equilibrium Analysis

Maria Berrittella Katrin Rehdanz Richard Tol Jian Zhang 

University of Palermo
University of Kiel
Economic and Social Research Institute
University of Hawaii
Copyright ©2008 Journal of Economic Integration

We used the GTAP-W model - GTAP version 5 with water resources added - to estimate the impact of hypothetical Doha-like liberalization of agricultural trade on water use. Three conclusions emerge. First, the change in regional water use is less than 10 per cent relative to the baseline in 2010, even if agricultural tariffs are reduced by 75 per cent. Second, patterns are non-linear. Water use may go up for partial liberalization, and down for more complete liberalization. This is because different crops respond differently to tariff reductions, but also because trade and competition matter too. Third, trade liberalization tends to reduce water use in water scarce regions, and increase water use in water abundant regions, even though water markets do not exist in most countries.

JEL classification: D58, F13, Q17, Q25

Keywords: computable general equilibrium | trade liberalization | water policy | water scarcity
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