Improved Assessment of the Economic Impacts of Drought in Arid Regions

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In arid and semiarid regions of the United States, droughts can have substantive and even disastrous economic consequences on direct water users and on other activities related to the use of water. Traditionally, impacts on off- stream water uses such as in agriculture, municipal and in industrial activities, have been measured during droughts. Effects on in-stream and non-diversionary water uses have been heretofore largely ignored, as have the secondary (market-linked) economic impacts of reduced direct water diversions. A model will be developed where direct and secondary economic impacts will be measured including the effects on both market and non-market goods. This economic analysis will incorporate input-output techniques with discrete stochastic programming analysis and will be driven by historic meteorological data and hydrologic models. It will also reflect institutional and legislative constraints, and estimated farm, business and household reactions to drought. A real case study will be used to calibrate and test the model, and the existing water supply and storage systems will be tested against diverse disaster scenarios.