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

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  • Eva Iglesias
  • Alberto Garrido
  • Almudena Gómez-Ramos

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). Copyright 2007 The Authors Journal compilation 2007 Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Ltd .

Suggested Citation

  • 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.
    • Handle: RePEc:bla:ajarec:v:51:y:2007:i:1:p:17-38
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    File URL: http://hdl.handle.net/10.1111/j.1467-8489.2007.00361.x
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    References listed on IDEAS

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    1. R. Maria Saleth & Ariel Dinar, 2004. "The Institutional Economics of Water," Books, Edward Elgar Publishing, number 3443.
    2. R. Maria Saleth & Ariel Dinar, 2004. "The Institutional Economics of Water : A Cross-Country Analysis of Institutions and Performance," World Bank Publications - Books, The World Bank Group, number 14884.
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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. 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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