Restrictive Effects of Water Scarcity on Urban Economic Development in the Beijing-Tianjin-Hebei City Region

Round 1

Reviewer 1 Report

Overall, very interesting article - fascinating to explore the differences across cities/sub-areas in the BTH city region. The great novelty is the application of the directional output distance function for water shadow pricing. Therefore, my recommendation for the authors is to re-structure the article by focusing on this area alone. At this stage, the title and abstract are more focused on the GDP impacts resulting from the IO optimisation model. Furthermore, it is not very clear how the two components (shadow pricing and IO optimisation) interact. An idea would be whether the shadow prices could help inform a different water allocation structure to serve as a baseline for GDP impact calculations.

1.      It would be great if the authors could make the distinction between cost of provision and scarcity value as components of water prices.

2.      It would also be great if the authors could give information on whether water scarcity is acknowledged at all in BTH (policies, pricing, supply curtailments) in order to show a direct connection between the reality of physical water scarcity and actual GDP losses. If prices are low and there is no curtailment how can there be any economic impact?

3.      A better exposure of relevant literature on the distance function and shadow pricing would be required

4.      Since shadow prices are claimed to be an indicator for conditions of allocative efficiency, the authors should give more exposure to economy-wide markets in the introduction section. Are there limits to re-allocate water from agriculture to industry and services in BTH? Nechifor and Winning. (2018), using CGE, show that an economy-wide re-allocation leads to important reductions in negative GDP impacts and that this is also dependent on the mobility of other factors of production.

5.      Could the authors detail how is the cost of water provision reflected in the distance function? Also, could the authors also discuss what would happen with the shadow price in case of cross-sectoral re-allocation of water resources?

6.      IO optimisation – a major critique to IO analysis is that it assumes perfect supply elasticity of factors of production. This seems the case here since there are no constraints on the supply of labour and capital. The maximisation of value added assumes a frictionless growth in employment and capital (included in the v_i value added). This is a major limitation and leads to important inflation of GDP impacts. A clearer comparison between the CGE and IO frameworks would be required – factor supply, importance of relative price changes, income effects etc.

7.      Interesting that South Hebei and Beijing have comparable per capita water availability however the economic impacts are higher – a discussion on the importance of economic structure and supply chain constraints would be useful.

Nechifor, V., & Winning, M. (2018). Global Economic and Food Security Impacts of Demand-Driven Water Scarcity—Alternative Water Management Options for a Thirsty World. Water, 10(10), 1442. https://doi.org/10.3390/w10101442

Author Response

Thanks to the reviewer, the specific question reply is uploaded in Word

Author Response File: Author Response.doc

Reviewer 2 Report

1-Introduction:
a) Make a prospectus of other regions in the world that suffer from the same problem of scarce and economic restrictions in the price of water: California; Brazilian Semi-Arid; Middle East.
b) Table 2 camouflishes the problem in the column "Water Resource per capita", since the values presented are averages per person of the whole city, when in fact there is difference of consumption for each sector (residential, industrial, services and agricultural), expand this table placing the consumption per capita of each sector;
3-Date and methodology:
a) Shadow price, is an economical engineering methodology based on restricted optimization models. This method is based on a linear mathematical machinery, but the data presented show that the behavior of prices is not linear, explain to the statistics this restriction and explain the simplifying assumption of the model against the phenomenology evaluated in the paper;
5-Discussion:
a) The results show that a possible solution to mitigate the problem comes from the saving water in agriculture, author must to mention the main current technologies, in the state of the art, and that must be developed to save water in agriculture, for example: agriculture precision, more efficient irrigation systems, genetic engineering to generate new varieties of plants resistant to lack of water, etc;
b) The authors should suggest other technologies in the state of the art to try to mitigate water scarcity, for example the article by Albiero et al. (2018) with a case study of the use of the Huanghe River by the city of Dalian-China (https://www.mdpi.com/2073-4441/10/2/215).

Author Response

Thanks to the reviewer, the specific question reply is uploaded in Word

Author Response File: Author Response.doc

Reviewer 3 Report

The paper estimates the shadow price of water in the BTH region using a directional output distance function. I find the topic of the analysis important and relevant but would like to see some improvements in the presentation of the topic and the results.

The description of the theoretical model starting on page 6 is nothing new and was not developed by this manuscript. The authors should highlight this and cite the appropriate sources. The outline of the method distracts from the overall manuscript and I can see how putting this material into the appendix would improve the flow of the manuscript.

It would be helpful for the reader if you could summarize your input data for the various regions in the model and data description. You are spending a large amount of time on the theoretical aspects of the model but there is little space allocated to the input data. I am aware that there is a lot of data going into the model but please find a way to present it in summarized form.

The manuscript is poorly set in the literature and the authors should compare their findings to other values in the literature. This is not the first water scarcity study

Equation numbers are listed twice starting on page 7

Author Response

Thanks to the reviewer, the specific question reply is uploaded in Word

Author Response File: Author Response.doc

Round 2

Reviewer 2 Report

Since the authors have made improvements in the paper, my opinion is to be accepted.

Author Response

Thank you for your comments.

Reviewer 3 Report

The authors have successfully addressed my concerns.

Author Response

Thank you for your comments.