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Growth, Water Resilience, and Sustainability: A DSGE Model Applied to South Africa
Uppsala University / Royal Swedish Academy of Sciences / Ningbo University, China.
Södertörn University, School of Social Sciences, Economics. Stockholm School of Economics.
2016 (English)In: Water Economics and Policy, ISSN 2382-624X, Vol. 2, no 4, 1650022Article in journal (Refereed) Published
Abstract [en]

In this paper, we analyze a dynamic stochastic general equilibrium model on how water resilience affects economic growth and dynamic welfare with special reference to South Africa. While water may become a limiting factor for future development in general, as a drought prone and water poor country with rapid population growth, South Africa may face more serious challenges for sustainable development. Using the model, we conduct numerical simulations for di¤erent parameter con…gurations with varying discount rate, climate change scenario, and the degree of uncertainty in future precipitation. We fi…nd that with sufficient capital accumulation, development may still be sustainable despite increased future water scarcity and decreased long-run sustainable welfare; While stochastic variation in precipitation has a negative effect on water resilience and the expected dynamic welfare, the e¤ect is mitigated by persistence in the precipitation pattern. With heavier time discounting and lower capital formation, however, the current welfare may not be sustained

Place, publisher, year, edition, pages
2016. Vol. 2, no 4, 1650022
Keyword [en]
Water resilience, growth, dynamic welfare, sustainability
National Category
URN: urn:nbn:se:sh:diva-29978DOI: 10.1142/S2382624X16500223OAI: diva2:927604
Available from: 2016-05-12 Created: 2016-05-12 Last updated: 2017-01-10Bibliographically approved

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