THREE APPROACHES TO MEASURING
NATURAL RESOURCE SCARCITY:
THEORY AND APPLICATION TO GROUNDWATER
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Efficient pricing of a resource incorporates both marginal cost of extraction and scarcity rents. Since groundwater resources exhibit natural supply constraints, scarcity rents must be imposed on current users. Given the difficulty of establishing clear groundwater ownership rights, scarcity value frequently goes unrecognized and is difficult to estimate. This results in inefficient pricing and misallocation of the resource. This thesis builds on three different methods to develop appropriate theoretical and empirical models relevant for indirect estimation of these shadow scarcity rents, which we consider as the initial and most challenging step towards efficient groundwater management. Empirical analyses are based on economic and hydrological
data from the island of Cyprus, representative of semi-arid regions.
Chapter 2 critically assesses previous theoretical and empirical attempts to derive the increase in social benefits from efficient pricing of groundwater and examines t΄he potential for groundwater management. This potential is seriously challenged by Gisser-Sanchez΄ s Effect (GSE): i.e. net benefits from optimally managing groundwater are insignificant for all practical purposes.
Chapter 3 attempts a re-examination of GSE by developing a dynamic model of adaptation to increasing groundwater scarcity, when backstop technology is available. Both groundwater scarcity rents and management benefits are derived by simulating the optimal and competitive-commonality solutions. Results point to the absence of GSE in aquifers facing complete exhaustion in the near future.
Chapter 4 proposes a refinement of revealed preference methods of valuation, by combining the hedonic and travel cost methods, and applies the refined model to derive the willingness to pay for groundwater quality. It is claimed that hedonic valuation of quality attributes can be misleading when the exogeneity assumption, with respect to these attributes, to sample selection is violated. Hence, the simultaneity between hedonic valuation and sample selection is modelled in the context of producer behaviour and investigated empirically in the case of land demanded for use as an input either in agricultural production or touristic development. The empirical analysis suggests that failing to correct for sample selection results in a biased valuation of groundwater quality.
In chapter 5 duality theory is employed to develop the distance function methodology of deriving shadow groundwater scarcity rents. The empirical application of the model involves estimating a stochastic input distance function from which the in situ shadow price of groundwater is derived.
Chapter 6 concludes the thesis bycomparing and contrasting the magnitude of groundwater scarcity rents and willingness to pay for scarce groundwater quality, derived from the models put forward in this research.
About the author:
Prof. Phoebe Koundouri is a world-renowned environmental economics professor and global leader in sustainable development. She is widely recognized
as a pioneer in innovative, human-centric, interdisciplinary systems for the sustainable interaction between nature, society, and the economy. She is listed
in the most-cited women economists in the world, with 15 published books and more than 465 published peer reviewed scientific articles, book chapters
Prof. Koundouri holds MPhil and a PhD in Economics and Econometrics from the University of Cambridge. For her studies she received a full scholarship
from the University of Cambridge and the Cambridge Commonwealth Trust. She then held academic positions at the University of Cambridge, University College London, University of Reading, London School of Economics. Currently she is University Professor (the university’s highest academic rank) at the
School of Economics, Athens University of Economics and Business.
Prof. Koundouri is an elected fellow of the World Academy of Art & Science and the President-elect of the European Association of Environmental and
Natural Resource Economists for the period 2019-2025 (EAERE) with more than 1200 scientific member institutions, from more than 85 different countries).
In 2020 she received the prestigious European Research Council (ERC) Synergy Grant, which focuses on design of the next generation of urban water
systems, via the combination of water science, systems and control theory, economics, decision-science and machine learning. Currently, this is the biggest research project in the world on urban water systems.
Prof. Koundouri is the Founder and Scientific Director of the Research Laboratory on Socio-Economic and Environmental Sustainability (ReSEES) at Athens University of Economics and Business, focusing on interdisciplinary research on socio-economic and environmental systems. She is also Affiliated Professor
at the ATHENA Research and Innovation Center, where she founded and scientifically directs the Sustainable Development Unit and the EIT Climate-KIC Hub Greece of the European Institute of Innovation and Technology, the latter focusing on accelerating technological and social innovations for use in the transition to a climate neutral economy. During the period 1991-2006, she studied and held academic positions in the UK.
Prof. Koundouri is also the co-Chair of United Nations Sustainable Development Network (UN SDSN) – Greece & Europe. The leadership of UN SDSN-Europe
is constituted from existing National SDSN European networks and its mission is to serve as a science driven interface with European Commission policymaking. Prof. Koundouri is also the Chair of the Scientific Advisory Board of the International Centre for Research on the Environment and the
Economy (ICRE8) and Chair of the Scientific Advisory Board of the European Forest Institute.
Prof. Koundouri is one of the Commissioners of the prestigious Lancet Commission on COVID-19 for which she co-chairs the “Green Recovery” Task Force.
She leads the UN SDSN Senior Working Group on “Transformation Pathways for the implementation of EGD and the SDGs”, co-leads the the UN SEAs Blue Growth Initiative. She is a member of the CEPR (Center for Economic Policy Research) Network (RPN) on Climate Change , member of the Priministerial Committee for the Recovery and 10-year Development Plan of Greece, the National Climate Change Committee of the Greece, as well as chair or member
of numerous European and International Scientific, Research and Policy Boards and Committees.
Prof. Koundouri acts as a scientific advisor to the European Commission, World Bank, European Bank of Reconstruction and Development, OECD, UN, NATO, WHO, World Water Council and various other Multilateral Institutions, as well as numerous national and international foundations and organizations.
She also advises national governments across the world. Prof. Koundouri is editorial board member of more than 20 prestigious scientific journals, including NATURE: Climate Action. Over the last two decades, Professor Koundouri has given keynote and public lecturers, at high level forums all over the world, and received various prizes for academic excellence, including best paper awards, highest policy impact paper award, European Research project award.
Since 1997, she has coordinated more than 100 interdisciplinary research projects, in all five continents, focused on combinations of Sustainable Development, Climate Change Mitigation and Adaptation, Behavioural Economics and Econometrics, Economics of Wellbeing and Happiness, Natural Resource-Food-Energy Nexus, Smart Water Systems, Ecosystem Services Valuation, Blue Growth, Circular Economy, Systems Innovation, Innovation Acceleration and Commercialization, and has attracted significant competitive research funding. Prof. Koundouri and her large interdisciplinary team (more than 200 researchers) have produced research and policy results that have contributed to accelerating research and innovation for the enablement of Sustainable Development and has contributed to shaping European and National policies.
Prof. Koundouri was born and raised in Cyprus and during 1991-2006 she studied and worked in the UK. Since 2006 she lives in Greece (Athens) with her husband, Prof. Nikitas Pittis, and their three daughters: Chrysilia, Billie and Athena.
Google Scholar: https://scholar.google.com/citations?user=BIczbp4AAAAJ&hl=en