In this paper a high‐resolution linked hydroeconomic model is demonstrated for drought conditions in a Brazilian river basin. The economic model of agriculture includes 13 decision variables that can be optimized to maximize farmers' yearly net revenues. The economic model uses a multi‐input multioutput nonlinear constant elasticity of substitution (CES) production function simulating agricultural production. The hydrologic component is a detailed physics‐based three‐dimensional hydrodynamic model that simulates changes in the hydrologic system derived from agricultural activity while in turn providing biophysical constraints to the economic system. The linked models capture the effects of the interactions between the hydrologic and the economic systems at high spatial and temporal resolutions, ensuring that the model converges to an optimal economic scenario that takes into account the spatial and temporal distribution of the water resources. The operation and usefulness of the models are demonstrated in a rural catchment area of about 10 km2 within the São Francisco River Basin in Brazil. Two droughts of increasing intensity are simulated to investigate how farmers behave under rain shortfalls of different severity. The results show that farmers react to rainfall shortages to minimize their effects on farm profits, and that the impact on farmers depends, among other things, on their location in the watershed and on their access to groundwater.

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This paper presents a linked hydro-economic model and uses it to examine the regional effects of water use regulations and product price changes on the agriculture of the São Francisco River Basin, Brazil. The effects of weather on surface water 228 Marcelo de O. Torres et al.availability are explicitly addressed using the hydrological model MIKE-Basin. Farmers' adjustments to changes in precipitation, surface water availability, and other factors are quantified using an economic model based on non-linear programming techniques. The models are externally linked. Results show that regional impacts, at the sub-basin level, vary depending on the location of each sub-basin relative to river flows. The effects of water use regulations and of exogenous price shocks on agriculture depend on weather, location, product mix and production technology. Implications of these results for policies designed to manage agriculture and water use are discussed.

Traditional productivity measures have been much less prevalent in fisheries economics than other measures of economic and biological performance. It has been increasingly recognized, however, that modeling and measuring fisheries' production relationships is central to understanding and ultimately correcting the repercussions of externalities and poorly designed regulations. We use a transformation function production model to estimate productivity and its components for catcher–processors in the Bering Sea and Aleutian Islands pollock fishery, before and after the introduction of a cooperative system that grants exclusive harvesting privileges and allows quota exchange. We also recognize the roles of externalities from pollock harvesting by incorporating data on climate, bycatch, and fish biomass. We find that productivity has been increasing over time, that many productive contributions and interactions of climate, bycatch, and fishing strategies are statistically significant, and that regulatory changes have had both direct and indirect impacts on catch patterns and productivity.