Challenges to Water Resource Management: The Role of Economic and Modeling Approaches

The field of water management is continually changing. Water has been subject to external shocks in the form of climate change and globalization. Water management analysis is subject to disciplinary developments and inter-disciplinary interactions. Are these developments well-documented in the literature? Initial observations in the interdisciplinary literature suggest that results are fragmented, implying that a state-of-the-art review is needed. This paper aims to close such a gap by reviewing recent developments in water economics that address increasing perceptions of water scarcity by looking first at changes in the supply and quality of water and then at the impacts of climate change on water supply extremes. Among responses to such challenges, this paper identifies changes to water use patterns by including and co-managing water from different sources, including surface and groundwater, reclaimed wastewater, and desalinated water. Technological advancements are also among the resources that address water challenges. Water challenges are also reflected in the management of internationally shared water. A recent surge in scientific work identified international treaties as a significant contributor to international water management. This paper reviews recently employed economic approaches, such as experimental economics, game theory, institutional economics, and valuation methods. And, finally, it explores modeling approaches, including hydro-economic and computable general equilibrium models, that are being used to deal with water challenges.