Analyzing the Effect of the Water Reduce Subsidies on GDP

The objective of this work is to analyze the effects of decreasein water subsidies (increase in the price of the water) onvarious economic sectors in order to promote the conservationof this resource based on the actual price of water. but over thepast decades, various subsidizing methods hold the cost of waterdown. on the other hand, the indiscriminate use of theseresources led the government to impose enormous costs. determiningthe economic impact of subsidy reform can be anessential factor in the determination of water price reformscenarios. the methodology that will be used to explore the implicationson the economy will be a computable generalequilibrium model (cge), previously designed for an analysisof the direct taxes of the andalusian economy (cardenete andsancho, 2003), but now enhanced and extended to include emissionsof pollutants and the introduction of environmental taxes(andré, cardenete and vel?zquez, 2005). this model has beenfurther modified to introduce the variations in the water pricethat this study investigates the effect of water subsidy reform onthe economy based on six scenarios using computable generalequilibrium model. results show that by decreasing subsidies,gdp will reduce in all economic sectors. government canprevent the decrease in production by redistributing incomes.