I. Estimating the economic impacts of drought.

Abstract

This paper proposes an innovative approach for estimating the economic impacts of a drought. The methodology proposed combines empirical estimates of the physical productivity of irrigation water with an input-output analysis that traces the impacts of a reduction in agricultural activity on an economy's products, incomes and employment. We present a case study for the northeastern region of Mexico. The results suggest that a drought may exert a significant impact on several distinct sectors of the economy. Even though droughts are inevitable, their economic impacts can be managed. Estimating these impacts, therefore, contributes to the design of drought management plans; in particular, in terms of justifying expenses on mitigating measures.