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Thesis Submitted for the Degree of Ph. D in Environmental Economics And Quantitative Policy Analysis for Sustainable Development in Water-stressedDeveloping Countries A Case Study of Morocco Thesis submitted for the degree of Ph. D in Environmental Economics and Environmental Management by Satoshi Kojima Environment Department University of York May 2005 i'ýý ý ýýýýýý'IÜýýjýýiý 2 Abstract Sustainable development has become a widely acclaimed objective in the global policy arena, but its operational principles have not yet been established. The main objective of this thesis is to contribute to operationalising the concept of sustainable development through conducting quantitative analysis of sustainable development policies. A special attention is paid to water crisis in water-stressed developing countries and a case study of Morocco is conducted. Before developing an applied model for policy simulations, an analytic model based on Ramsey-Cass-Koopmans type growth model is constructed. The analytic model not only serves as a model platform of the applied model but also provides crucial insights to solutions of the applied model. The analytic model is studied both analytically and numerically and important policy insights are obtained. In addition, this combined analysis highlights the importance of following up qualitative analysis by quantitative simulations. Based on the implications provided by the combined analysis, the applied model is constructed by incorporating various stylised facts observed in water-stressed developing countries. This model is calibrated based on the Moroccan data for the year 1994, and also dynamically validated with time-series data of selected endogenous variables. The validation has been successful. Numerical simulations of sustainable development policies are conducted on the validated model. Due to stochastic elements in agricultural production and foreign exchange rates there exist gaps between expectations and realised outcomes. The policy simulations explicitly deal with these gaps and provide interesting policy insights. Major findings include (i) importance of public investment in both safe water access provision and the irrigation sector, (ii) impacts of exogenous drivers on sustainable development policies, and (iii) importance of international aid flows to implement sustainable development through mitigating severe water consumption suppression caused by optimal pricing schedules. 3 Contents Abstract .............................................................................................................. 2 Contents ............................................................................................................. 3 List Tables 8 of ...................................................................................................... List Figures 9 of .................................................................................................... Dedication 11 ....................................................................................................... Acknowledgements 12 .......................................................................................... Author's Declaration 14 ....................................................................................... Chapter 1 Introduction 1.1 Background 15 ............................................................................................. 1.1.1 Motivation 15 ......................................................................................... 1.1.2 Articulation the development 18 of concept of sustainable ...................... 1.2 Basic 23 methodology .................................................................................. 1.2.1 Study 23 scope........................................................................................ 1.2.2 Adoption 27 of quantitative policy analysis ............................................ 1.2.3 Policy 28 analysis procedure ................................................................... 1.3 Research 29 objectives ................................................................................. 1.4 Overview this thesis 30 of ............................................................................ Chapter 2 Formulation of Basic Framework 2.1 Introduction 32 ............................................................................................ 2.2 Review frameworks 32 of existing analytical ............................................... 2.2.1 Hydrology-based 33 optimum allocation models .................................... 2.2.2 Growth models .................................................................................. 34 2.2.3 Linear 41 multisector models .................................................................. 4 2.2.4 Computable general equilibrium models............................................ 42 2.3 Development framework of analytical .....................................................46 2.3.1 Necessity dynamic of models ............................................................. 46 2.3.2 Necessity of decentralised 47 setting ....................................................... 2.3.3 Objective function the 50 of private sector .............................................. 2.3.4 Objective function the 52 of public sector ............................................... 2.3.5 Expectation formation 55 ........................................................................ 2.4 Established framework 58 analytical ............................................................ Chapter 3 Analytic Model of Water-Economy Interaction 3.1 Introduction 59 ............................................................................................ 3.2 Outline the 60 of analytic model .................................................................. 3.3 First-stage 61 optimisation ........................................................................... 3.3.1 The household's 61 problem ................................................................... 3.3.2 The firm's 67 problem ............................................................................ 3.3.3 Market 68 equilibrium ............................................................................ 3.3.4 First-stage 69 solution ............................................................................. 3.4 Second-stage 73 optimisation ....................................................................... 3.4.1 Water 73 production ............................................................................... 3.4.2 The 75 government ................................................................................. 3.4.3 The trajectories 77 optimal ..................................................................... 3.5 Qualitative the trajectories 81 analysis of optimal ........................................ 3.5.1 Optimal 81 steady-state .......................................................................... 3.5.2 Local the 83 stability analysisof optimal steady-state............................. 3.6 Numerical the trajectories 86 simulation of optimal ..................................... 3.6.1 Model 86 specification ............................................................................ 3.6.2 Simulation 91 results .............................................................................. 3.7 Conclusions 96 ............................................................................................ Chapter 4 The Applied Model 4.1 Introduction ............................................................................................ 99 4.2 Modelling the key facts stylised ............................................................. 100 4.3 First-stage optimisation .......................................................................... 102 5 4.3.1 The household's problem ..................................................................102 4.3.2 The firm's problem 113 .......................................................................... 4.3.3 Market equilibrium ........................................................................... 115 4.3.4 First-stage 119 solution ............................................................................ 4.4 Se 121 cond-stage optimisation ...................................................................... 4.4.1 Outline .............................................................................................. 121 4.4.2 The 121 government problem .................................................................. 4.4.3 Solution of the second-stage 125 optimisation ......................................... 4.5 Trade tax and ......................................................................................... 128 4.5.1 General ............................................................................................. 128 4.5.2 Trade 130 and commodity price ............................................................... 4.5.3 Income tax ........................................................................................ 133 4.6 Co nclusions ........................................................................................... 134 Chapter 5 Calibration and Validation of the Applied Model 5.1 Introduction ........................................................................................... 137 5.2 Case study country Morocco 138 - ........................ ....................................... 5.2.1 Geographyand climate 138 .................................................................... 5.2.2 Demography 140 ...................................................................................
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