Economic Impacts of Irrigation-Constrained Agriculture in the Lower Po Basin

Abstract

Climate change, increasing demand for water, higher environmental standards and inelastic water supply suggest that future drought response in Southern Europe would require more efficient management of water use. In this context, there is a pressing need for a better understanding of the economic impacts of irrigation restrictions, including their microeconomic and broad economic repercussions. This paper connects a multi-attribute Revealed Preference Model working at an agricultural district level with a regionally calibrated supply and use model that combines nonlinear programming and input-output modeling techniques to address water allocation issues. To the best of our knowledge, this is the first time these two modeling approaches are combined in this fashion. Methods are illustrated with an application to the Lower Po River Basin (LPRB) in the Emilia Romagna Region, Italy. Results show that irrigation restrictions generate rising incremental losses in the agricultural districts of the LPRB, which are amplified through negative inter-sectorial feedbacks at a regional level.

Measuring the Transaction Costs of Historical Shifts to Informal Drought Management Institutions in Italy

“…These include the transaction costs of the reform measures, along with any abatement costs incurred by economic agents during the implementation of local adaptation strategies. Recent research focusing on the analysis of abatement costs in the PRB shows that the proportional rule used to reallocate water under the DSC approach-which relinquishes a fixed percentage of the initial allocation from users, irrespective of the economic losses involved-underperforms other formal drought management arrangements, such as water charges [54]. This gap will be further amplified via forward and backward linkages among economic sectors within the PRB, and with other Italian regions outside the basin.…”

Drought in the Po Valley: Identification, Impacts and Strategies to Manage the Events

“…While some farmers experienced severe yield losses, agriculture as a whole found the drought beneficial in economic terms, while the majority of the burden was shifted onto final prices, i.e., consumers. According to [36] instead, irrigation constraints result in increasing incremental losses in agricultural areas of the lower Po River basin, which are further exacerbated by negative inter-sectoral feedbacks at the regional level.…”