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This study o§ers a high-resolution model of an economy-wide water supply. The model is su¢ ciently detailed to represent all main water sources; the principal segments of the con- veyance system; urban, industrial and agricultural demand regions; and various water types, including fresh, saline, and recycled water. The model characterizes the optimal-spatial water allocation and establishes a comprehensive system of pumping levies and user fees that supports the optimal allocation. In addition, it enables simulating government pricing policies and assessing the welfare consequences of deviation from the optimal ones. The model is calibrated for Israeli 2010 data, and its usefulness is demonstrated by an evaluation of the economy-wide cost function and an assessment of the welfare cost of the recent Israeli Balanced Budget Water Economy legislation. Finally, the implications for international water trading between Israel and its neighbours are derived.


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