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Economic analysis of drought risk An application for irrigated agriculture in Spain
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dAgricultural Water Management 98 (2011) 823–833
Contents lists available at ScienceDirect
Agricultural Water Management
journa l homepage: www.e lsev ier .com/ locate /agwat
conomic analysis of drought risk: An application for irrigated agriculture
n Spain
arina Gil a, Alberto Garridoa,?, Almudena Gómez-Ramosb
Research Centre for the Managament of Agricultural and Environmental Risks (CEIGRAM), Technical University of Madrid, Spain
University of Valladolid, Spain
r t i c l e i n f o
rticle history:
eceived 10 February 2010
ccepted 16 December 2010
vailable online 3 February 2011
eywords:
rought
rrigation
a b s t r a c t
This paper describes a two-part methodology for managing the risk posed by water supply variability to
irrigatedagriculture. First, aneconometricmodel isused toexplain thevariation in theproductionvalueof
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 termsof irrigated agriculture. In the secondpart, the fittedmodels 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 theconomic risk
onte Carlo simulation 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
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