The Economics of Drought

Eric Edwards (), Leslie Sanchez and Sheetal Sekhri
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Eric Edwards: Department of Agricultural and Resource Economics, University of California, Davis, California, USA
Leslie Sanchez: Rocky Mountain Research Station, United States Forest Service, Fort Collins, Colorado, USA
Sheetal Sekhri: Department of Economics, University of Virginia, Charlottesville, Virginia, USA

Annual Review of Resource Economics, 2024, vol. 16, issue 1, 105-124

Abstract: Water scarcity and drought have determined the structure, location, and fate of civilizations throughout history. Drought remains an important factor in the performance of developed and developing economies, especially in the agricultural sector. While significant attention has been paid to drought as a meteorological phenomenon and on its economic impact, comparative institutional analysis of the economics of drought is limited. In this review, we focus on how economic institutions, the humanly devised constraints that shape the allocation and use of water, impact the severity and incidence of droughts. Water property rights in developed countries encourage infrastructure investments and reallocations that mitigate drought impacts, although such institutions may codify inequitable water access during drought. Developing economies rely more on informal strategies for mitigating drought and remain more vulnerable, experiencing economic losses, conflict, and violence.

Keywords: water; institutions; property rights; drought; water rights (search for similar items in EconPapers)
JEL-codes: Q25 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1146/annurev-resource-101623-100253

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