Weather Derivatives and Water Management in Developing Countries: An Application for an Irrigation District in Central Mexico Report as inadecuate




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This paper analyzes possible improvements to water allocation from introducing weather derivatives as an insurance instrument in irrigation districts with no water markets and two cropping seasons. Dry-season production depends completely on irrigation, while wet-season production depends on irrigation as a supplement to naturally occurring precipitation. Using an analytical model of water allocation and historical data from an irrigation district in Central Mexico, simulations show that weather derivatives could encourage interseasonal reallocation of water from wet to dry season, generating new Pareto-optimal water allocations that improve overall welfare among producers.

Keywords: crop insurance ; irrigation districts ; optimal irrigation policy ; water management ; weather derivatives

Subject(s): Agricultural and Food Policy

Crop Production/Industries

Risk and Uncertainty

Issue Date: May 01 2017

Publication Type: Journal Article

ISSN: 1068-5502

Language: English Published in: Journal of Agricultural and Resource Economics, Volume 42, Number 2 Page range: 146-163

Record appears in: Western Agricultural Economics Association > Journal of Agricultural and Resource Economics





Author: Juárez-Torres, Miriam ; Sánchez-Aragón, Leonardo ; Vedenov, Dmitry

Source: http://ageconsearch.umn.edu/record/257995?ln=en



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