| Water shortages have occurred in many areas in China, particularly in the North. Currently the mechanism for allocating water across competing users---agricultural, industrial, service and residential---is not market-based, with the government assigning water to each respective user. Among suggestions for managing water shortages are a reallocation of water across users within each region (to equate the marginal value product of water across major use categories) and an inter-regional transfer of water from the South to the North via the South-North Water Transfer Project.;This dissertation investigates the economics of water shortage issues, analyzes the economic impacts of the intra-regional water reallocation, inter-regional water reallocation and their combination, and examines their potential economic gains. The parameters of a Ramsey-type growth model of a small, open, competitive economy are fitted to year 2000 Chinese data and the empirical model is used to perform policy experiments.;The reallocation of water within each region is found to increase aggregate GDP by about 1.5% per year over the period 2000--2060. The potential welfare gain due to this reallocation is 1002.51 billion RMB. Transferring water from southern to northern China via the South-North Water Transfer Project, on average, only increases aggregate GDP by 0.05% per year over the period 2000--2060, while its welfare gain is 557.23 billion RMB. Combining intra-regional and inter-regional water reallocations, on average, increases aggregate GDP by 0.38% per year over the period and the welfare gain from this combination is 1148.06 billion RMB.;Other findings suggest that over the period 2000--2060: (i) inter-regional water transfers, on average, increase the share of aggregate GDP produced in northern China from 37.8% to 42.6%; (ii) an intra-regional reallocation of water decreases the North's share of total GDP from 37.8% to 34.4%; and (iii) a combination of the two policies increases the North's share of total GDP from 37.8% to 47.0%. In terms of food security, an inter-regional reallocation of water could decrease the self-sufficiency rate by about 1 percentage point, while both an intra-regional and an inter-intra-regional water reallocation could decrease the self-sufficiency rate by about 4 percentage points. |
