Economic Value of Water in Tennessee Estimated by Combining Input-Output Coefficients with Linear Programming

Owen, Stephanie; English, Burton C.; Lambert, Dayton M.; Clark, Christopher D.; He, Lixia L.

Economic Value of Water in Tennessee Estimated by Combining Input-Output Coefficients with Linear Programming

2017

Owen, Stephanie | English, Burton C. | Lambert, Dayton M. | Clark, Christopher D. | He, Lixia L.

Tennessee’s water resources could become stressed as population continues to increase, climate change impacts water availability, and agricultural producers increase irrigation. These stresses could impact the agricultural sector and other industries as competition for limited water resources increases. To prepare for these anticipated changes, farmers, policymakers, and researchers alike could benefit from quantifying the economic value of water to formulate cost-effective and sustainable water use practices. This analysis uses a linear programming (LP) model to determine the shadow value of water for 536 economic sectors in Tennessee, given changes in water availability and water use by economic sectors. Economic sectoral activity uses data from IMPLAN (the Impact Analysis for Planning model). Gross regional product is maximized, constrained by water and labor requirements for each sector. The economic implications of changes in water availability and final demand among different industries is also evaluated to determine which sectors have the highest values for water under varying water availability scenarios. The goal is to provide useful information that can be used in planning and managing Tennessee’s water resources in the medium to long term.

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