The Impact of Agricultural Water Conservation Policy on Economic Growth

An agricultural water conservation policy prevalent worldwide encourages producers to improve on-farm irrigation efficiency. Contrary to intention, increasing empirical evidence reveals that this policy may set an ‘irrigation efficiency trap’ that worsens water crises by reducing water supplies and jeopardizing economic growth. We derive a pair of testable hydrologic-economic conditions required for the sustained existence of the trap. We do so by modeling an agroindustrial economy patterned after a region (Snake River Plain aquifer, Idaho, USA) that has fallen into the trap. An agricultural sector withdraws water to irrigate crops, and the difference between water withdrawals and the amount consumed by crops (return flow) recharges water supplies used in industrial production. The conditions require that: (1) The rate of return of water in industrial production outweighs the rate of return of water withdrawn to food production; and (2) An inequality relating the elasticities of food production with respect to irrigation withdrawals and irrigation efficiency hold in a particular direction. If empirical testing of these conditions provides evidence of the sustained existence of the irrigation efficiency trap in a given region, policy-makers are well-advised to target more potentially effective agricultural water conservation measures such as reducing irrigated acreage, switching to crops requiring less water, or irrigating current crops at a deficit.