Water Pricing and Allocation Policies: Economic Efficiency versus Equity in Water-Scarce Regions

Abstract

Water scarcity has emerged as a formidable challenge in numerous regions across the globe, necessitating robust and well-calibrated water pricing and allocation policies. This paper investigates the intricate balance between economic efficiency and equity in the management of scarce water resources. The tension between market-based solutions that promote efficiency and regulatory or equity-oriented approaches that ensure fairness is explored using both theoretical foundations and empirical case studies. We critically examine various water pricing models, allocation mechanisms, and the role of government and community participation in policy design. Experimental simulations based on data from arid regions provide insights into how alternative strategies perform under different scarcity scenarios. The results underscore the potential trade-offs and synergies between efficiency and equity goals and suggest a path forward for integrated, adaptive water governance.