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The Palo Duro and Double Mountain Fork Regions of Texas include counties that cover sub-basins of the Ogallala Aquifer. These regions rely on the Ogallala Aquifer for water. As concern grows over the diminishing availability of groundwater, policies such as caps on water use are put in place to conserve water. These policies raise concerns over their impacts on employment, markets, the welfare of different income groups, and impacts across political boundaries. This study analyzed policy impacts in the Palo Duro and Double Mountain Fork Regions in Texas. A computable general equilibrium model (CGE) was developed to assess impacts on the economy by combining economic theory with real economic data. Data were collected for water use, land (including agricultural land use and production), and Impact Analysis for Planning (IMPLAN) sectors. These data were compiled into a social accounting matrix (SAM) to represent the flow of economic transactions in each of the two regions and balanced using the RAS procedure. The General Algebraic Modeling System (GAMS) was used to compile the data and create the CGE model. Land and water were added to the model as factors of production.
Importantly, a CGE model of this kind has never been incorporated into water policy analysis for this area in Texas. Rather, most studies have only utilized a modified IMPLAN model to measure direct, indirect, and induced impacts of economic output, value-added, and employment within a regional economy. The CGE model makes it
possible to further evaluate factors such as employment impacts, price impacts, and other economy-wide implications of various policy scenarios. Comparisons were made between the impacts of different policy scenarios within the two regions. The scenarios analyzed included a baseline scenario without any policy implementation along with projected saturated thickness depletion after 50 years, a water reduction policy scenario, a land reduction scenario, and technology advancement scenario. The results of the study indicate that the projected saturated thickness depletion scenario with the land reduction policy scenario had the biggest impact on the overall economy in both the Palo Duro and Double Mountain Fork regions. In the Palo Duro Region, the projected saturated thickness scenario with the water reduction scenario mitigates some of the negative changes to GDP through policy, while the projected saturated thickness depletion scenario with the technology change scenario mitigates some of the negative changes in the Double Mountain Fork region. There is need for future research as these scenarios do not account for the negative impacts to producers such as costs and loss of production. This information is useful for policymakers to base their decisions on in order to keep the regional economy viable while saving water. In addition, the creation of the foundational CGE modeling procedure will be beneficial in evaluating alternative scenarios in the future as water levels and political dynamics in the region change over time. This study had several limitations including how detailed the model could be. Future research should focus on nested production functions and combining this model with other economic models to improve the abilities of this model.



CGE, Computable Generalized Equilibrium


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