Economic Evaluation of Water Resource Management in South Korea Based on Benefit–Cost Analysis

Abstract

The economic evaluation of the government policy is useful to identify the effectiveness of its financial management and the achievement of its goal. Based on valuation studies of water quality improvement from the Environmental Valuation Information System database provided by Korea Environment Institute, this study employed a meta-regression to measure the benefits of water quality improvement in three major river basins in South Korea. The empirical model is specified to capture the differentiated impact of water quality improvement by each river basin and the regression results showed that the increase in water quality grade has an impact on willingness-to-pay values. The total benefits provided by Han, Nakdong, and Geum River are estimated to be about US$490 million, about US$173 million, and about US$50 million per year, respectively. The estimated benefits were then compared with the costs, namely river management funds (RMFs) which are financial resources to support a variety of projects for water quality improvement. Based on benefit–cost comparison, this study explores the economic evaluation of water resource management in South Korea. This study also provides policy options including the equity of imposing water use charges, operational efficiency of RMFs, and stakeholder engagement for inclusive water governance that are helpful to maintain the sustainability of water resource in the long run.