Meteorological drought is defined as the event that arises when precipitation is lower than average and initially affects rainfed crops; this is transformed into hydrological drought when persistent drought affects water storage. We have studied the economic impact of multiyear droughts by applying the economic surplus to the last severe drought (2005-2008) in Andalusia. The method is applied to both rainfed and irrigated agriculture. The results show negative effects on regional social welfare, with an estimated global loss of EUR 1512 million, although this negative impact is unequally distributed. There is a quantity effect (lower yields) and higher prices due to shorter supply. Overall, rainfed farms experience a negative impact on their income since higher prices only partially compensate for yield reduction, although, paradoxically, certain irrigation farms increase their income when higher prices overcorrect lower yields. Consumers are always negatively affected by drought. This result may aid in the design of agricultural policy models and drought-recovery policies.
Keywords: Economic surplus; Hydrological drought; Impact assessment; Irrigation; Rainfed.
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