6. Conclusions
In this paper, we construct a two-sector endogenous growth model in which the extractive use and the impoundment activities of water resources are incorporated, and apply the model to analyzing the case of Poyang Lake. The results of that model imply that on any sustainable growth path, the impoundment activities should grow at a constant rate to offset the negative impact of the extractive use of water on the regenerative capacities of water resources. Given that more and more hydropower stations are being constructed along the upper Yangtze River in addition to Three Gorges Dam, the gross extractive use of water resources will not decrease in the near future. Hence, to maintain sustainable growth, the construction of impoundment projects along the lower Yangtze River should grow at a constant rate. We also provide a numerical example showing that when the endowment or the regenerative capacities of water resources are low, the long-run sustainable growth cannot be achieved without sufficient impoundment activities. For policy implications, we find that the optimal levels of extractive water use and impoundment activities should be matched, and the government should encourage the production of knowledge based on the technological levels and the endowment of Poyang Lake.
