Water Availability and Economic Development…Signs of the Invisible Hand? An Empirical Look at the Falkenmark Index and Macroeconomic Development

Rashid Al Hmoud, Jeffrey Edwards

Research output: Contribution to journalArticle

Abstract

It is widely believed that critically low levels of water availability will hinder economic growth and development. To the contrary, we find that countries with available water resources below 500 m3 actually outperform countries with levels between 500 and 1600 m3 in terms of growth, per capita GDP, and investment. We show descriptive evidence that much of the reason for this seemingly unintuitive result lies in the natural pressures faced by critically scarce countries to move from water intensive agriculture to less water intensive services and industry, with an emphasis on the services sector. We believe governmental policy should focus less on water resource attainment in support of agriculture and more on transitioning to services.
Original languageEnglish
JournalNatural Resource Journal
StatePublished - Oct 2005

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