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Abstract

Agricultural production and water resources are sensitive to climate variability and change. Decadal climate variability (DCV) phenomena are in the early stages of being explored. This paper investigates the economic value of DCV information in the Edwards Aquifer region of Texas as well as possible adaptation to that information. To do this we first do an econometric estimate of the impacts of DCV phase combinations on crop yields in the EA region, then we alter regional model to include DCV information. We find that the average economic value of perfect DCV information forecast is $40.76 million per year. And for a less perfect forecast in terms of knowing DCV information under transition probability, the average economic value is around $1.52 million per year.

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