Valuing Water Quality with Adaptation: Evidence from a Natural Experiment in Jordan

Though water scarcity threats are increasing in severity across many regions of the world, allocation often remains inefficient — as in Jordan, the site of this study. One commonly discussed solution for increasing resource availability in water-scarce regions is the use of recycled wastewater for irrigation. Yet, despite significant potential benefits, an oft-cited concern with wastewater reuse is its potential impact on water quality. This paper examines the impact of this solution by exploiting a natural experiment arising from complementary infrastructure investments that introduced recycled wastewater to a new region of the Jordan Valley. We study farmer preferences for wastewater reuse, as well as farm adaptation and profitability. We find no evidence of negative impacts on farm revenues or costs over the short term, and observe signs of adaptation via the shifting of production toward less-salinity sensitive crops. Contingent valuation measures of the willingness to pay for reliable recycled water supply across newly treated and comparison areas indicate resistance to the expanded reuse of wastewater, however, which suggests that farmers may believe that this shift will entail more substantial long-term costs. Furthermore, the stated willingness to pay and short-term marginal productivity of water estimates appear unrelated. These results suggest the need for caution in interpreting short-term adaptation and preference responses to policies that substantially alter irrigation choices and behaviors, and point to the need for longer-term studies of wastewater reuse.