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Targeted Subsidies for Water Conservation in Smallholder Agriculture

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  • Bhandari, Humnath
  • Chakravorty, Ujjayant
  • Habib, Muhammad Ashraful
  • Emerick, Kyle

Abstract

Groundwater depletion threatens long-term food security in developing countries. Moreover, groundwater pumping contributes to climate change. We evaluate the effect of targeted subsidies for technology to use groundwater more efficiently in agriculture. Using a randomized controlled trial across 360 villages in Bangladesh, we show that subsidies reduce electricity used for pumping by 38 percent, but only when targeted to water sellers. Subsidizing technology to individual farmers has smaller effects. Features of the groundwater market can explain this result. Natural monopolist water sellers charge fixed fees to farmers, but maintain a role in irrigation planning, incentivizing them to adopt conservation practices.

Suggested Citation

  • Bhandari, Humnath & Chakravorty, Ujjayant & Habib, Muhammad Ashraful & Emerick, Kyle, 2025. "Targeted Subsidies for Water Conservation in Smallholder Agriculture," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 361140, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea25:361140
    DOI: 10.22004/ag.econ.361140
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