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Optimal adaptation strategies to face shocks on groundwater resources

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  • de Frutos Cachorro, Julia
  • Erdlenbruch, Katrin
  • Tidball, Mabel

Abstract

We consider an exogenous and reversible shock to a groundwater resource, namely a decrease in the recharge rate of the aquifer. We compare optimal extraction paths and the social costs of optimal adaptation in two cases: under certainty, i.e. when the date of occurrence of the shock is known, and under uncertainty, when the date of occurrence of the shock is a random variable. We show that an increase in uncertainty leads to a decrease in precautionary behavior in the short run and to an increase in precautionary behavior in the long run. We apply our model to the particular case of the Western la Mancha aquifer in Spain. We show that, in this context, it is advantageous for the water agency to acquire information on the date of the shock, especially for high-intensity and intermediate-risk events.

Suggested Citation

  • de Frutos Cachorro, Julia & Erdlenbruch, Katrin & Tidball, Mabel, 2014. "Optimal adaptation strategies to face shocks on groundwater resources," Journal of Economic Dynamics and Control, Elsevier, vol. 40(C), pages 134-153.
  • Handle: RePEc:eee:dyncon:v:40:y:2014:i:c:p:134-153
    DOI: 10.1016/j.jedc.2014.01.005
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    References listed on IDEAS

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    1. Roseta-Palma, Catarina, 2002. "Groundwater Management When Water Quality Is Endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 93-105, July.
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    Cited by:

    1. repec:eee:resene:v:51:y:2018:i:c:p:67-83 is not listed on IDEAS
    2. Jean-christophe PEREAU & Lauriane MOUYSSET & Luc DOYEN, 2016. "Groundwater management in food security context," Cahiers du GREThA 2016-14, Groupe de Recherche en Economie Théorique et Appliquée.

    More about this item

    Keywords

    Groundwater resource; Optimal behavior; Exogenous shock; Uncertainty;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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