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River Basin Economics and Management: International Trade, Allocation and Quality


Water is essential to human life and activities and river is an importance source of water. This dissertation addresses two problems related to rivers. First is the water quantity allocation between countries which share an international river. International resources such as water are typically subject to conflict as individual countries perceive individual gains from increased use of the resource. This inherent conflict is also reflected in analytical studies which are typically partial equilibrium and hence naturally assume that welfare functions are increasing in the resource allocation. In this setting, the question arises if there are ever circumstances such that it is in the joint self-interest of political entities to share the resource.

With a two-country-two-good Ricardian trade model, the conflicts over water naturally stems from a welfare function monotonically increasing in water could be mitigated, since the free trade welfare functions can be non-monotone when a country has absolute disadvantage in production of both goods. The welfare function is applied to a Nash bargaining game to show how it reduces conflicts over water. The results also hold when the number of production factors increases to two and number of countries sharing the river increases to three. This contributes to the literature by combining the general equilibrium trade model in a river sharing context, deriving the welfare functions that can be utilized in a game-theoretic framework of river sharing, and demonstrating the possibility that the welfare functions are not always monotonically increasing in a country's resources. Second is the allocation and efficient usage of river water in an irrigated agricultural region, with an application to the California lower San Joaquin River. The results show that the region is threaten by water salinity problems in times of drought and efficient use of the water could help increase aggregate irrigation benefits. This research incorporates a set of crop-water-salinity agricultural production functions in an integrated hydrologic-economic surface water quality model and is significant in terms of empirical originality.

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