Investigating and Predicting the Impact of Productivity Shock on Economic Convergence and the Potential of Regional Water Markets (Case Study: Iran and Border Countries)

Water scarcity is a global and regional concern and requires a global and regional perspective. The water shortage crisis that the world and consequently Iran is experiencing shows the importance of water resources and the optimal use of those resources. Therefore, water supply is of special importance for the people of the world and different economic sectors, and any disruption in its process can lead to social and economic problems. Most policymakers and researchers believe that water scarcity and its effects on developing and developed countries as a global threat. It is clear that the issue of water has become an area of international cooperation. Concerns about water scarcity and water management problems in different parts of the world have made water issues the focus of many international and non-governmental organizations (NGO). According to studies, the formation of regional water markets is one of the methods of water resources management. To reach regional water markets, one of the effective tools is to create a suitable platform for economic convergence. Convergence is generally centered on gravity models. In the structure of these models, the basic condition for achieving economic convergence is convergence in production and productivity. This study has dealt with the most important variables affecting economic convergence through the productivity channel. Because distance is important in the formation of regional water markets, Iran has been selected and studied for convergence analysis with neighboring countries (Pakistan, Turkey, Russia, Kazakhstan, UAE, Armenia, Azerbaijan, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia). Also, in order to see the effect of productivity shocks in the best possible way, a dynamic computable general equilibrium model has been used. The data required to simulate the scenario presented in this study are taken from the ninth version of the GTAP database. This version includes the world with 140 regions or countries, including Iran and 57 economic sectors. 57 parts of the model have been changed to 13 parts and 5 production factors to 8 production factors, which are as follows. Sectors include: Agriculture, Other Agriculture, Livestock, Forestry, Fisheries, Coal, Oil, Gas, Industry, Petrochemicals, Electricity, Water and Services. Production factors include: water, land, rain fed land, pasture land, skilled labor, unskilled labor, capital and natural resources. The characteristic of computable general equilibrium models is that it different scenarios can be evaluated and examined in the context of general equilibrium. For the productivity variable, the concept of total productivity of production factors is used, which is one of the factors affecting production and convergence. The results showed that positive productivity shocks have led to the expansion of foreign trade between Iran and neighboring countries. In practice, the expansion of trade can be considered as a factor for economic convergence between Iran and neighboring countries. Also, the productivity shock, in addition to slowly increasing economic prosperity, has also led to a kind of stability and stability in economic growth. Therefore, if productivity is an inevitable movement in the economic use of water resources, it can lead to economic convergence with an emphasis on water trade. Also, the result of the dynamic model shows a positive outlook for Iran and neighboring countries. Since economic convergence is a precondition for reaching regional water markets, Therefore, convergence with border countries is a suitable strategy for the Iranian economy to form regional water markets. It is natural that the formation of regional water markets can provide a good opportunity to deal with the crisis in water resources and also increase prosperity and stability in economic growth. So that the effect of the welfare change scenario shows that this index in Iran will increase from 31952.9 in 2023 to 2793848 in 2030 and this shows the positive effect of the regional water market on welfare. So that the effect of the welfare change scenario shows that this index in Iran will increase from 31952.9 in 2023 to 2793848 in 2030 and this shows the positive effect of the regional water market on welfare. According to the literature on gravity models, total value added, which constitutes GDP, is the most important variable affecting the convergence. Therefore, the effect of productivity shock on GDP indicates the necessary potential for economic convergence. The result of the dynamic model showed that the effect of positive productivity momentum on the change in the value of GDP is positive. It should be noted that, in the long run, by 2030, Iran and neighboring countries will reach a relative stability in terms of GDP value. Thus, the flow of productivity in the long run can provide stable conditions for GDP. Accordingly, the appropriate strategy for the Iranian economy in the formation of regional water markets can be considered as convergence with neighboring countries, which will also provide a good opportunity to deal with the crisis in water resources.