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Economic drought management index to evaluate water institutions' performance under uncertainty

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  • Iglesias, Eva
  • Garrido, Alberto
  • Gomez-Ramos, Almudena

Abstract

Reservoir management and intertemporal water allocation are critical issues in semiarid regions where agriculture has to confront highly variable rainfall patterns. In this paper, we derive and propose an economic drought management index (EDMI) to evaluate water institutions' performance to cope with drought risk. The EDMI is based on the optimal conditions of a stochastic dynamic optimisation problem that characterises reservoir management. The index's main advantages are its ease of interpretation and breadth of scope, as it incorporates information on hydrological processes, structural constraints, water institutions' rules, and the economic benefits of water use. An empirical application is developed to assess the institutional rules governing water allocation in two different supply systems in Andalusia (southern Spain)

Suggested Citation

  • 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.
    • Handle: RePEc:ags:aareaj:118316
    DOI: 10.22004/ag.econ.118316
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    References listed on IDEAS

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    1. 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.
    2. Alaouze, Chris M., 1991. "Transferable Water Entitlements Which Satisfy Heterogeneous Risk Preferences," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 35(2), pages 1-12, August.
    3. Randall, Alan, 1981. "Property Entitlements And Pricing Policies For A Maturing Water Economy," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 25(3), pages 1-26, December.
    4. Quiggin, John C. & Chambers, Robert G., 2004. "Drought policy: a graphical analysis," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(2), pages 1-27.
    5. Alan Randall, 1981. "Property Entitlements And Pricing Policies For A Maturing Water Economy," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 25(3), pages 195-220, December.
    6. Chris M. Alaouze, 1991. "Transferable Water Entitlements Which Satisfy Heterogeneous Risk Preferences," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 35(2), pages 197-208, August.
    7. Brennan, Donna C. & Scoccimarro, Michelle, 1999. "Issues in defining property rights to improve Australian water markets," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 43(1), pages 1-21, March.
    8. Alaouze, Chris M, 1991. "Intertemporal Water Transfers and Drought," Australian Economic Papers, Wiley Blackwell, vol. 30(56), pages 114-127, June.
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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. 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.
    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. 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.
    7. 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.
    8. 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.
    9. Sağlam, Yiğit, 2011. "Optimal Pricing of Water: Optimal Departures from the Inverse Elasticity Rule," Working Paper Series 18553, Victoria University of Wellington, School of Economics and Finance.

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