Assessment Of The Economic Impacts Of Californias Drought On Urban Areas

This document reports some background information on the extent and severity of the 1987-91 California drought, evaluates existing work on the economic effects of the drought, and presents an agenda for future research to make an overall estimate of the economic costs of the drought in urban areas. It recommends a survey of urban water agencies to identify drought management policies and the resulting cutbacks in water use by various customer classes; to identify an estimate of economic losses incurred by residential customers using demand curve estimates or contingent valuation methodology; to identify contingent valuation surveys of commercial sectors hard-hit by the drought, such as nurseries and landscape contractors; and to identify a brief assessment of the industrial sector, which was mostly protected from cutbacks that would have resulted in lost output or jobs. This research was partially sponsored by California Urban Water Agencies, a nonprofit, nonpartisan organization of 11 urban wholesale and retail water agencies.