Economic modeling of water resources in agriculture : top down and bottom up approaches

Agricultural sector plays a critical role in food security, and in some developing countries it also makes up a high labor-intensive economic sector. The conclusions of the Intergovernmental Panel on Climate Change’s (IPCC) fourth assessment report suggest that climate change could threaten the agricultural sector due to changes in precipitation, temperature patterns, and an increase of extreme weather events. The objective of this thesis is to explore and compare the top/down and the bottom/up approaches in order to account for the economic impacts of water availability in the agricultural sector. In order to do that, two models were developed: Computable General Equilibrium and Agricultural Multimarket model. The models are conducted at global and national scale, respectively. At the global scale, the study of the economic impacts of climate change, through the ICES-W model, shows the expected results in accordance with the shock imposed; there is an increase in the demand of endowments (land and capital for irrigation), a decrease in agricultural production, and only a small change in GDP. On the other hand, the study of the economic impacts of climate change at national level, through the Agricultural Multimarket Model, shows small absolute economic impacts. However, results suggest large distributional effects across regions and activities.