Water resource systems as the basic components of the regional economic activities have not been explicitly considered in the past regional econometric models. Our research purpose is to examine empirically the hypothesis that if a water resource is not able to move, then interregional population migration and the industrial structure would be changed depending upon such conditions as regional water resource systems and the other economic conditions.
Relationships between water resoruce systems and regional economic activities in two regions, the one has an ample water resource and the other has not, are modelled in this paper. The new features of the model are (i) the investment functions with a new-water price variable and an abatement cost of water pollution, (ii) population functions, especially a migration flow function with the water demands of households, (iii) the production functions for industrial sector as new and recycling water demand functions, (iv) a price formation function of new water, and (v) a set of functions of water pollution behaviors.