Water Constraints to Agricultural Productivity in Bhutan

This paper uses two years of agriculture census data to build a panel dataset thatconsists of all the small towns in Bhutan. This dataset is used to estimate the impact of irrigation gaps and droughton the yields of paddy, maize, and other crops. The paper compares the estimated impacts from a panel fixed effectsmodel and a spatial first differences model. The findings show that irrigation gaps reduce paddy yields and droughtsreduce maize yields. Estimates from the spatial first differences model are found to be consistent relative tothose from the panel fixed effects model. The paper further finds that water constraints reduce yields of vegetablecrops, and other constraints, such as labor shortages, wild animals, insects, and diseases, also reduce the yields ofcereal crops.