Public Provision and Protection of Natural Resources: Groundwater Irrigation in Rural India

This paper examines the trade-off between resource intensive development and preservation of natural resources in the context of groundwater. Use of public schemes that expand groundwater irrigation to mitigate poverty is challenged as being unsustainable, especially when water tables around the world are rapidly depleting. This paper evaluates the effects one such scheme on groundwater use in northern India with the intent to determine if these schemes accelerate water depletion. On the contrary, I find that the program decreased total use of groundwater. I propose a mechanism that explains these findings, and test it using village-level longitudinal census data on wells and aquifer depth. The model predicts that public provision has a heterogeneous impact on the aquifers and it leads to sustainable use, when the fixed costs for private well provision are high. Consistent with the predictions, I find that there is a significant jump in the water-saving effects of the scheme at the water table depth at which the fixed costs of water provision rise substantially due to the technological limitations of surface pumps. JEL Classifications: H54, O12, O13, Q01, Q25, Q56