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

Listed author(s):
  • Gil, Marina
  • Garrido, Alberto
  • Gómez-Ramos, Almudena
Registered author(s):

    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.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0378-3774(10)00391-4
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    Article provided by Elsevier in its journal Agricultural Water Management.

    Volume (Year): 98 (2011)
    Issue (Month): 5 (March)
    Pages: 823-833

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    Handle: RePEc:eee:agiwat:v:98:y:2011:i:5:p:823-833
    Contact details of provider: Web page: http://www.elsevier.com/locate/agwat

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    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(02), 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), March.
    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, 03.
    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 Española de Estudios Agrosociales y Pesqueros, Ministerio de Medio Ambiente, Rural y Marino (formerly Ministry of Agriculture), issue 197.
    10. 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, 01.
    11. Iglesias, Eva & Garrido, Alberto & Gomez-Ramos, Almudena, 2003. "Evaluation of drought management in irrigated areas," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 29(2), October.
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