Nico Heerink
Development Economics Group, Wageningen University

This paper analyses the impact of the institutional setup of user-based water allocation on efficiency of agricultural water use, using data collected among water user associations (WUAs) and households in a county in northwest China. Explanatory variables representing the impact of the institutional setup are derived from Agrawal’s user-based resource governance framework. Using the robust regression method, we find that resource characteristics, group characteristics, characteristics of relationships between resource and groups as well as external forces significantly affect crop production per unit of water in our research area. Some of the identified factors, however, do not affect cropping income per unit of water, because they stimulate water savings at the expense of higher expenditures for other agricultural inputs. Such counteracting effects are especially noteworthy for the level of poverty and the degree of dependence on the resource in a WUA. Other major novel findings are that government subsidies paid to WUAs are counterproductive in stimulating water savings, and that higher water prices contribute to higher crop production as well as higher incomes per unit of water.