Economic drought management index to evaluate water institutions' performance under uncertainty
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Reservoir management and intertemporal water allocation are critical issues in semiarid
regions where agriculture has to confront highly variable rainfall patterns. In this paper,
we derive and propose an economic drought management index (EDMI) to evaluate
water institutions' performance to cope with drought risk. The EDMI is based on the
optimal conditions of a stochastic dynamic optimisation problem that characterises
reservoir management. The index's main advantages are its ease of interpretation and
breadth of scope, as it incorporates information on hydrological processes, structural
constraints, water institutions' rules, and the economic benefits of water use. An
empirical application is developed to assess the institutional rules governing water
allocation in two different supply systems in Andalusia (southern Spain)