To charge or to cap in agricultural water management. Insights from modular iterative modeling for the assessment of bilateral micro-macro-economic feedback links

• Published in: The Science of the total environment Vol. 742; p. 140526
• Main Authors: Parrado, Ramiro, Pérez-Blanco, C. Dionisio, Gutiérrez-Martín, Carlos, Gil-García, Laura
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 10.11.2020
• Subjects: Computable General Equilibrium; Micro-macroeconomic feedbacks; Positive Mathematical Programming; Water caps; Water charges; Water policy; Water caps; Water policy; Micro-macroeconomic feedbacks; Water charges; Computable General Equilibrium; Positive Mathematical Programming
• ISSN: 0048-9697; 1879-1026
• DOI: 10.1016/j.scitotenv.2020.140526

This paper develops an iterative micro-macro-economic modeling framework to assess agricultural water management policies including feedbacks between local and economy-wide impacts. The main contribution of the paper is the introduction of a set of bidirectional protocols that work through land use and price changes to model the bilateral feedbacks between the micro and macro scales. The proposed framework is applied to the Castile and León Region in Spain, where we assess the performance of two alternative water conservation policies (charges and caps) and compare results to those obtained using a conventional stand-alone microeconomic model. We find that, as compared to the proposed modular framework, the assessment of water conservation policies using conventional stand-alone microeconomic models is expected to overestimate water conservation and underestimate economic performance. Overall, our results suggest that water conservation targets can be achieved with lower economic losses than those anticipated by conventional stand-alone microeconomic models. [Display omitted] •We study the micro- macro-economic two-way feedbacks in water conservation.•We assess the performance of two water conservation policies: charges and caps.•Conventional stand-alone assessments tend to overestimate water conservation.•Stand-alone assessments tend to underestimate economic performance.•Water conservation targets could be achieved with lower economic losses.