IDEAS home Printed from https://ideas.repec.org/a/eee/agiwat/v98y2011i5p823-833.html
   My bibliography  Save this article

Economic analysis of drought risk: An application for irrigated agriculture in Spain

Author

Listed:
  • Gil, Marina
  • Garrido, Alberto
  • Gómez-Ramos, Almudena

Abstract

This paper describes a two-part methodology for managing the risk posed by water supply variability to irrigated agriculture. First, an econometric model is used to explain the variation in the production value of irrigated agriculture. The explanatory variables include an index of irrigation water availability (surface storage levels), a price index representative of the crops grown in each geographical unit, and a time variable. The model corrects for autocorrelation and it is applied to 16 representative Spanish provinces in terms of irrigated agriculture. In the second part, the fitted models are used for the economic evaluation of drought risk. Inflow variability in the hydrological system servicing each province is used to perform ex-ante evaluations of economic output for the upcoming irrigation season. The model's error and the probability distribution functions (PDFs) of the reservoirs' storage variations are used to generate Monte Carlo (Latin Hypercube) simulations of agricultural output 7 and 3 months prior to the irrigation season. The results of these simulations illustrate the different risk profiles of each management unit, which depend on farm productivity and on the probability distribution function of water inflow to reservoirs. The potential for ex-ante drought impact assessments is demonstrated. By complementing hydrological models, this method can assist water managers and decision makers in managing reservoirs.

Suggested Citation

  • Gil, Marina & Garrido, Alberto & Gómez-Ramos, Almudena, 2011. "Economic analysis of drought risk: An application for irrigated agriculture in Spain," Agricultural Water Management, Elsevier, vol. 98(5), pages 823-833, March.
  • Handle: RePEc:eee:agiwat:v:98:y:2011:i:5:p:823-833
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378-3774(10)00391-4
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lorite, I.J. & Mateos, L. & Orgaz, F. & Fereres, E., 2007. "Assessing deficit irrigation strategies at the level of an irrigation district," Agricultural Water Management, Elsevier, vol. 91(1-3), pages 51-60, July.
    2. Goodman, D. Jay, 2000. "More Reservoirs Or Transfers? A Computable General Equilibrium Analysis Of Projected Water Shortages In The Arkansas River Basin," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(2), pages 1-16, December.
    3. Peck, Dannele E. & Adams, Richard M., 2010. "Farm-level impacts of prolonged drought: is a multiyear event more than the sum of its parts?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(1), pages 1-18.
    4. Javier Calatrava & Alberto Garrido, 2005. "Modelling water markets under uncertain water supply," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 32(2), pages 119-142, June.
    5. Eva Iglesias & Alberto Garrido & Almudena Gómez-Ramos, 2007. "Economic drought management index to evaluate water institutions' performance under uncertainty ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(1), pages 17-38, March.
    6. Quiroga, Sonia & Iglesias, Ana, 2009. "A comparison of the climate risks of cereal, citrus, grapevine and olive production in Spain," Agricultural Systems, Elsevier, vol. 101(1-2), pages 91-100, June.
    7. Salami, Habibollah & Shahnooshi, Naser & Thomson, Kenneth J., 2009. "The economic impacts of drought on the economy of Iran: An integration of linear programming and macroeconometric modelling approaches," Ecological Economics, Elsevier, vol. 68(4), pages 1032-1039, February.
    8. Iglesias, Eva & Garrido, Alberto & Gomez-Ramos, Almudena, 2003. "Evaluation of drought management in irrigated areas," Agricultural Economics, Blackwell, vol. 29(2), pages 211-229, October.
    9. Aguillo, Francisco & Portero, Israel, 2002. "Agua y producción agrícola: un análisis econométrico del caso de Murcia," Revista Espanola de Estudios Agrosociales y Pesqueros, Ministerio de Medio Ambiente, Rural y Marino (formerly Ministry of Agriculture), issue 197, pages 1-30.
    10. Iglesias, Eva & Garrido, Alberto & Gomez-Ramos, Almudena, 2007. "Economic drought management index to evaluate water institutions' performance under uncertainty," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(1), pages 1-22.
    11. Alberto Garrido & M. Ramón Llamas & Consuelo Varela-Ortega & Paula Novo & Roberto Rodríguez-Casado & Maite M. Aldaya, 2010. "Water Footprint and Virtual Water Trade in Spain," Natural Resource Management and Policy, Springer, number 978-1-4419-5741-2, December.
    12. Dannele E. Peck & Richard M. Adams, 2010. "Farm-level impacts of prolonged drought: is a multiyear event more than the sum of its parts?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(1), pages 43-60, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xinchuang Xu & Quansheng Ge & Jingyun Zheng & Erfu Dai & Xuezhen Zhang & Shanfeng He & Guangxu Liu, 2013. "Agricultural drought risk analysis based on three main crops in prefecture-level cities in the monsoon region of east China," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 66(2), pages 1257-1272, March.
    2. Moghaddasi, Reza & Eghbali, Alireza & Lakhaye Rizi, Parisa, 2014. "Analysis and Forecasting of Drought by Developing a Fuzzy-Based Hybrid Index in Iran," MPRA Paper 53153, University Library of Munich, Germany.
    3. Ghazal Shahpari & Hossein Sadeghi & Malihe Ashena & David García-León, 2022. "Drought effects on the Iranian economy: a computable general equilibrium approach," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(3), pages 4110-4127, March.
    4. Finger, Robert, 2012. "Modeling the sensitivity of agricultural water use to price variability and climate change—An application to Swiss maize production," Agricultural Water Management, Elsevier, vol. 109(C), pages 135-143.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Connor, Jeffery D. & Kandulu, John M. & Bark, Rosalind H., 2014. "Irrigation revenue loss in Murray–Darling Basin drought: An econometric assessment," Agricultural Water Management, Elsevier, vol. 145(C), pages 163-170.
    2. Iglesias, Eva & Báez, Karen & Diaz-Ambrona, Carlos H., 2016. "Assessing drought risk in Mediterranean Dehesa grazing lands," Agricultural Systems, Elsevier, vol. 149(C), pages 65-74.
    3. Farnaz Pourzand & Ilan Noy & Yigit Saglam, 2019. "Droughts and farms' financial performance in New Zealand: a micro farm-level study," CESifo Working Paper Series 7633, CESifo.
    4. Dannele E. Peck & Richard M. Adams, 2010. "Farm-level impacts of prolonged drought: is a multiyear event more than the sum of its parts?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(1), pages 43-60, January.
    5. Ben Groom & Phoebe Koundouri & Celine Nauges & Alban Thomas, 2008. "The story of the moment: risk averse cypriot farmers respond to drought management," Applied Economics, Taylor & Francis Journals, vol. 40(3), pages 315-326.
    6. Garrido, Alberto & Novo, Paula & Rodriguez Casado, Roberto & Varela-Ortega, Consuelo, 2009. "Can virtual water 'trade' reduce water scarcity in semi-arid countries? The case of Spain," 2009 Conference, August 16-22, 2009, Beijing, China 51048, International Association of Agricultural Economists.
    7. Pourzand, Farnaz & Noy, Ilan & Sağlam, Yiğit, 2020. "Droughts and farms’ financial performance: a farm‐level study in New Zealand," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 64(3), July.
    8. Novo, P. & Garrido, A. & Varela-Ortega, C., 2009. "Are virtual water "flows" in Spanish grain trade consistent with relative water scarcity?," Ecological Economics, Elsevier, vol. 68(5), pages 1454-1464, March.
    9. Birthal, Pratap S. & Negi, Digvijay S. & Khan, Md. Tajuddin & Agarwal, Shaily, 2015. "Is Indian agriculture becoming resilient to droughts? Evidence from rice production systems," Food Policy, Elsevier, vol. 56(C), pages 1-12.
    10. Pourzand, Farnaz & Noy, Ilan & Sağlam, Yiğit, 2019. "Droughts and farms’ financial performance in New Zealand: A micro farm level study," Working Paper Series 8159, Victoria University of Wellington, School of Economics and Finance.
    11. Bastian, Christopher T. & Gray, Stephen T. & Peck, Dannele E. & Ritten, John P. & Hansen, Kristiana M. & Krall, James M. & Paisley, Steven I., 2011. "The Nature of Climate Science for the Rocky Mountain West: Implications for Economists Trying to Help Agriculture Adapt," Western Economics Forum, Western Agricultural Economics Association, vol. 10(2), pages 1-10.
    12. Guerrero-Baena, M. Dolores & Villanueva, Anastasio J. & Gómez-Limón, José A. & Glenk, Klaus, 2019. "Willingness to pay for improved irrigation water supply reliability: An approach based on probability density functions," Agricultural Water Management, Elsevier, vol. 217(C), pages 11-22.
    13. Kang, Hyunwoo & Sridhar, Venkataramana & Mills, Bradford F. & Hession, W. Cully & Ogejo, Jactone A., 2019. "Economy-wide climate change impacts on green water droughts based on the hydrologic simulations," Agricultural Systems, Elsevier, vol. 171(C), pages 76-88.
    14. Guven, Cahit & Tong, Lan & Ulubasoglu, Mehmet, 2021. "Growing More Rice with Less Water: The System of Rice Intensification and Rice Productivity in Vietnam," MPRA Paper 108768, University Library of Munich, Germany.
    15. Lavee, Doron, 2010. "The effect of water supply uncertainty on farmers' choice of crop portfolio," Agricultural Water Management, Elsevier, vol. 97(11), pages 1847-1854, November.
    16. Dono, Gabriele & Mazzapicchio, Graziano, 2010. "Uncertain water supply in an irrigated Mediterranean area: An analysis of the possible economic impact of climate change on the farm sector," Agricultural Systems, Elsevier, vol. 103(6), pages 361-370, July.
    17. Peck, Dannele E. & Adams, Richard M., 2010. "Farm-level impacts of prolonged drought: is a multiyear event more than the sum of its parts?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(1), pages 1-18.
    18. Peck, Dannele E. & Adams, Richard M., 2011. "A reply to ‘Multiyear versus single-year drought: a comment on Peck and Adams’," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 55(3), pages 1-4, September.
    19. Ancev, Tihomir, 2011. "Multiyear versus single-year drought: a comment on Peck and Adams," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 55(3), pages 1-3, September.
    20. Levente Timar & Eyal Apatov, 2020. "A Growing Problem: Exploring Livestock Farm Resilience to Droughts in Unit Record Data," Working Papers 20_14, Motu Economic and Public Policy Research.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:agiwat:v:98:y:2011:i:5:p:823-833. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/agwat .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.