Marginal Cost versus Average Cost Pricing with Climatic Shocks in Senegal: A Dynamic Computable General Equilibrium Model Applied to Water

Anne Briand
2006 Social Science Research Network  
The model simulates on a 20-year horizon, a first phase of increase in the water resource availability taking into account the supply policies by the Senegalese government and a second phase with hydrologic deficits due to demand evolution (demographic growth). The results show that marginal cost water pricing (with a subsidy ensuring the survival of the water production sector) makes it possible in the long term to absorb the shock of the resource shortage, GDP, investment and welfare
more » ... Unemployment drops and the sectors of rain rice, market gardening and drinking water distribution grow. In contrast, the current policy of average cost pricing of water leads the long-term economy in a recession with an agricultural production decrease, a strong degradation of welfare and a rise of unemployment. This result questions the basic tariff (average cost) on which block water pricing is based in Senegal.
doi:10.2139/ssrn.946177 fatcat:fmngq5kuj5au7evvjpn4mj4s5y