Table of Contents

Handbook of Water Economics

Handbook of Water Economics

Edited by Ariel Dinar and Kurt Schwabe

Water scarcity, whether in the quality or quantity dimension, afflicts most countries. Decisions on water management and allocation over time, space, and among uses and users involve economic considerations. This Handbook assembles research that represents recent thinking and applications in water economics. The book chapters are written by leading scholars in the field who address issues related to its use, management, and value. The topics cover analytical methods, sectoral and intersectoral water issues, and issues associated with different sources of water.

Chapter 1: Introduction

Ariel Dinar and Kurt Schwabe

Subjects: economics and finance, environmental economics, environment, water


The development of water economic methods and their applications is a mirror image of the development of civilization and its use of water. Roughly speaking, as early as the 1950s through the 1960s, water economics began focusing on optimal production decisions and allocation among consuming activities – at that time applied mainly to irrigated agriculture. Water scarcity had yet to be recognized as a global problem, and inter-sectoral competition had not been studied. With the growth in population, development of hydropower facilities and intensification of industrial production in the 1970s and early 1980s, water economics turned its attention to addressing economic questions of urban water supply, hydropower decisions and inter-sectoral water allocations. Soon after, when water and environmental pollution developed into a social problem, impacting environmental amenities in many places, the profession experienced an expansion of economic work to include valuation of environmental amenities, economics of water treatment and pollution control, and the economics of water ecosystems. Finally, between the mid-1990s and today, with the realization that institutions are important aspects of water management, and with the increased conflicts over shared water and the beginning of the internalization of the role of climate change in water resources, the field of water economics has witnessed a rise in works and methods applied to address institutional approaches, international water management and questions related to climate change.