Direct and indirect economic impacts of drought in the agri-food sector in the Ebro River basin (Spain)

Abstract

Abstract. The economic evaluation of drought impacts is essential in order to define efficient and sustainable management and mitigation strategies. The aim of this study is to evaluate the economic impacts of a drought event on the agricultural sector and measure how they are transmitted from primary production to industrial output and related employment. We fit econometric models to determine the magnitude of the economic loss attributable to water storage. The direct impacts of drought on agricultural productivity are measured through a direct attribution model. Indirect impacts on agricultural employment and the agri-food industry are evaluated through a nested indirect attribution model. The transmission of water scarcity effects from agricultural production to macroeconomic variables is measured through chained elasticities. The models allow for differentiating the impacts deriving from water scarcity from other sources of economic losses. Results show that the importance of drought impacts are less relevant at the macroeconomic level, but are more significant for those activities directly dependent on water abstractions and precipitation. From a management perspective, implications of these findings are important to develop effective mitigation strategies to reduce drought risk exposure.

Impacts of European drought events: insights from an international database of text-based reports

“…The impacts of drought are often classified either into the categories "economic", "environmental", and "social", or into "direct", "indirect", and "intangible", which refers to non-market losses (e.g., Wilhite and Vanyarkho, 2000;Ding et al, 2011;Logar and van den Bergh, 2013;Gil et al, 2013). Knutson et al (1998) defined drought impacts as specific effects of drought, which are symptoms of vulnerability.…”

Preface: Current advances in analysis, modelling and mitigation of the costs of natural hazards

“…These costs comprise damage due to natural hazards as well as costs of prevention, risk mitigation and responses to natural hazards. However, recent work shows that cost assessments are often still incomplete, reliable impact data are scarce (Handmer et al, 2005;Gall et al, 2009), damage estimation methods are often crude and insufficient (Meyer et al, 2013;Merz et al, 2010), and the knowledge about costs and benefits of precautionary measures is scattered (Hudson et al, 2014;Kreibich et al, , 2012Kreibich et al, , 2015. The EU Seventh Framework Programme project CONHAZ -Costs of Natural Hazards (http://conhaz.org/) -collected and reviewed current knowledge on methods for assessing individual cost types, such as direct damage to housing; indirect losses in the macroeconomy; costs due to intangible effects, e.g.…”

Assessing the economic impacts of drought from the perspective of profit loss rate: a case study of the sugar industry in China

“…Then, applying the susceptibility rates and damage functions mentioned above, the income losses, which are the revenues calculated from the amounts of estimated crop damage multiplied by 2010 crop prices, will be determined for different scenarios of floods. Similarly, Gil et al (2013) and Diersen and Taylor (2003) also make an assessment of economic impacts based on the concept of income loss.…”

“…However, few papers actually take the time trend of agrifood price into consideration. In literature considering evolution of price, Gil et al (2013) include price index and trend of agricultural production in building a model for assessing drought impacts. The influences of price and time trend on production value are considered.…”