Economic impact of alternative water policy scenarios in the Spanish production system: An input-output analysis

This paper analyses the economic impact of alternative water policies implemented on the Spanish production system. The methodology comprises two versions of the input-output price model: an average cost formulation and a mark-up formulation. The input-output framework evaluates the impact of the various water policy measures on production prices, consumption prices, intermediate water use and private real income. The results show that a tax on the water used by sectors considerably reduces inter-mediate water consumption and increases production and consumption prices. On the other hand, according to Jevons, paradox, improvements in technical efficiency, which lead to a reduction in the water requirements of all sectors and an increase in water production, raise water consumption. The combination of a tax on the water used by sectors and an improvement in the technical efficiency of water in the production sphere takes the pressure off prices and significantly reduces intermediate water consumption. (C) 2008 Elsevier B.V. All rights reserved.