CoPS/IMPACT Working Paper Number G-186

Title: Modelling the Australian government's buyback scheme with a dynamic multi-regional CGE model

Authors: Peter B. Dixon, Maureen T. Rimmer and Glyn Wittwer


TERM-H2O is a dynamic, multi-regional computable general equilibrium model of the Australian economy with agricultural detail adapted to include regional water accounts. It focuses on the effects of inter-regional water trading. Factors of production are mobile between sectors in farm industries. TERM-H2O includes complementarity conditions that impose constraints on the volume of irrigation water traded between regions.

The application detailed here is to the Commonwealth government's water buyback scheme against a background of temporary drought. The buyback scheme provides a windfall gain for holders of water rights by raising the price of irrigation water. The scheme may provide a net benefit to irrigation regions while increasing environmental flows.

JEL classification: C68, Q25, R13, R15.

Please cite the later published version in:
'Saving the Southern Murray-Darling Basin: the Economic Effects of a Buyback of Irrigation Water', Economic Record 87(276):153-168, January 2011. DOI: 10.1111/j.1475-4932.2010.00691.x

Keywords: regional modelling, CGE modelling, water.

An Executive Summary for Working Paper Number G-186 can be downloaded in PDF format.

Working Paper Number G-186 can be downloaded in PDF format.

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