Producer Responses to Surface Water Availability and Implications for Climate Change Adaptation

Abstract

Climate change is predicted to bring changes in weather and water availability. The effect on agriculture depends on the ability of producers to modify their practices in response to changing distributions. We develop a two-stage theoretical model of planting and irrigation decisions and use a unique dataset to empirically estimate how producers respond to changes in expected water availability and deviations from expectations. As water supplies decrease, producers respond by planting fewer acres and concentrating the application of water. Highlighting the importance of adaptation in this context, failure to account for this behavioral response overstates climate change impacts by 17%. (JEL Q15, Q25)