Water Resources Management

, Volume 30, Issue 4, pp 1357–1373 | Cite as

Water Variability and the Economic Impacts on Small-Scale Farmers. A Farm Risk-Based Integrated Modelling Approach

  • Francisco J. Fernández
  • Roberto D. Ponce
  • Maria Blanco
  • Diego Rivera
  • Felipe Vásquez


Strengthening the planning of hydrological resources to optimize the use of water in agriculture is a key adaptation measure of the Chilean agricultural sector to cope with future climate change. To address this challenge, decision-makers call for tools capable of representing farmers’ behaviours under the likely stresses generated by future climate conditions. In this context, of special concern are the effects of water variability on small-scale farmers, who commonly operate with narrow profit margins and who lack access to financial resources and technological knowledge. This paper sheds light on the economic impacts of changes in water availability on small-scale agriculture. We provide a hydro-economic modelling framework that captures the socio-economic effects of water shocks on smallholders in the Vergara River Basin, Chile. This approach links a farm risk-based economic optimization model to a hydrologic simulation model adjusted for the basin. Our results indicate that at the aggregated level, there will be minor economic impacts of climate change on the basin’s small-scale agriculture, with small decreases in both expected utility and wealth. However, large differences in the economic impacts of wealthy and poor small-scale farmers are found. Changes in water availability, reduce the options of land reallocation to increase farmer’s expected utility, being the poor small-scale farmers the most negatively affected.


Hydro-economic model Small-scale farmers Risk Water variability Climate change 



We would like to thank to International Development Research Centre (IDRC-Canada) for providing financial support for this research (n° 106924–001). We would also like to thank to Water Research Center for Agriculture and Mining (WARCAM) supported by CONICYT/Chile in the framework of FONDAP 2013 (Fifth National Competition for Research Centers in Priorities Areas)—CRHIAM/CONICYT/FONDAP 15130015.

Compliance with Ethical Standards

Author Francisco Fernández has received research grants from IDRC-Canada and WARCAM.


This study was funded by International Development Research Centre (IDRC-Canada) (n° 106924–001) and by Water Research Center for Agriculture and Mining (WARCAM) supported by CONICYT/Chile in the framework of FONDAP 2013 (n° 15130015).

Conflict of Interest

Disclosure of potential conflicts of interest: Authors declare that they do not have a conflict of interest.


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© Springer Science+Business Media Dordrecht 2016

Authors and Affiliations

  1. 1.ETSI AgronomosTechnical University of MadridMadridSpain
  2. 2.School of Economics and BusinessUniversidad del DesarrolloConcepciónChile
  3. 3.Facultad de Ingeniería Agrícola, Water Research Center for Agriculture and Mining (WARCAM)Universidad de ConcepciónConcepciónChile
  4. 4.School of Economics and Business, Universidad del Desarrollo, Concepción-Chile, Research Nucleus on Environmental and Resource Economics-MSI (RS 130001). Departamento de EconomíaUniversidad de ConcepciónConcepciónChile

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