Hedging the risk of hydrological drought in irrigated agriculture. The role of precautionary savings
Gómez-Limón, José A.
Guerrero Baena, María Dolores
Fernández Gallardo, José Antonio
PublisherTaylor & Francis
SubjectIrrigation water supply gap
Drought savings account
Hydro-economic stochastic modelling
Stochastic dominance analysis with respect to a function
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This paper explores the viability of precautionary savings as a hydrological drought risk management instrument in irrigated agriculture. To that end, first, the Drought Savings Account (DSA) is proposed as a personal savings account to which farmers make regular contributions, with withdrawals allowed in the event of water supply gaps to guarantee a minimum income. Second, the implementation of the proposed instrument is empirically assessed in an illustrative case study using an innovative simulation approach. Results obtained suggest the DSA is actuarially sound, supporting its implementation as a cost-effective instrument to hedge hydrological drought risk.
Embargado hasta 04/02/2023