Analyzing the Shadow Price of Industrial Water Resources and Water Shortage Scenario - An Application of Water Input-Output Linear Programming -

Abstract

This study set the water input-output model by linking the amount of water use to inter-industry relations table (IRT), and estimated shadow prices of water resources in agricultural, industrial and service sector using linear programming method. The 2014 water data and IRT data were collected and linked for integration of water usage and input-output table, and 30 major categories of IRT were redefined into 12 sub-sectors. Using the data, the shadow prices and their changes in each sector were estimated according to drought scenarios. The main results derived from the water input-output linear programming are as follows. Shadow prices of agriculture water, industrial water and service industry water were 864 won/㎥, 27,545 won/㎥ and 275,449 won/㎥ respectively. The shadow price changes by water shortage (10% to 90% constraint) ranged from 1,518 to 2,369 won/㎥ for agricultural use, 61,721 to 997,092 won/㎥ for industrial use, and 294,923 to 381,192 won/㎥ for service industry. In particular, it was confirmed that the damage level in the industrial sector increased sharply at the 50% restriction level.