Amundsen, Eirik S. (1999): Drought and Optimal Groundwater Managment.
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This paper considers the problem of a water management authority that is faced with the threat of a drought that will take place at an uncertain date. Three management policies are investigated: i) the laissez-faire policy of automatic regulation through Open Access mechanisms, ii) the policy of keeping a rationed level of water usage until the water table is restored, and iii) an economically optimal policy taking account of the probability of a drought and the fact that water is an asset (a stock of natural capital). In particular, it is shown that the optimal pre-drought steady-state stock of water is smaller than the stock that would be optimal in the no-drought case. Hence, no precautionary stock is built up. However, a more extensive drought period will lead to a larger pre-drought steady-state stock.
|Item Type:||MPRA Paper|
|Original Title:||Drought and Optimal Groundwater Managment|
|Keywords:||Drought; groundwater; economic management; uncertainty|
|Subjects:||Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q2 - Renewable Resources and Conservation > Q20 - General
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q2 - Renewable Resources and Conservation > Q25 - Water
|Depositing User:||Eirik S. Amundsen|
|Date Deposited:||06. Oct 2008 00:06|
|Last Modified:||21. Feb 2013 18:11|
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