Assessing the Socio-Economic and Environmental Impacts of Water Supply Constraints in Inner Mongolia, China

Previous studies have examined the effects of various policies (e.g., taxes and subsidies) on water resource management. However, limited research has systematically analyzed the socio-economic and environmental (SEE) effects of water supply constraints in water-scarce regions from an industry-wide perspective. In this study, a water-constrained computable general equilibrium (WCGE) modelComputable general equilibrium model is developed by integrating water supply limitations as a key production factor into an extended CGE framework. The model is applied in Inner MongoliaInner Mongolia (China) to evaluate the SEE effects of different levels of water supply reduction across industries. It is found that water supply constraints negatively impact the economy and reshapes industrial trade structures. Agriculture (AGR) and primary manufacturing (PRM) increase their value-added by investing more in labor and capital, whereas energy extraction (ENC) and services (SRV) experience declines in value-added due to their high dependence on water input. The water productivity of ENC, advanced manufacturing (ADM), and SRV improves significantly. AGR shows the largest reduction in physical water consumption but only a modest increase in water productivity (e.g., a reduction of 6.85 × 10⁹ m3 in physical water consumption and an increase of 12.31 CNY/m3 in water productivity under a 50