Speaker: Nikhil Basavappa

Title: Climate Maladaptation and the Commons: Groundwater Management in India

Abstract: India is the world’s largest groundwater user, with 90% used for agriculture. Groundwater, however, is a common pool resource, generating a tragedy of the commons that threatens agricultural sustainability. We develop a parsimonious model to show how a popular policy intervention — subsidizing efficient irrigation technology — can further exacerbate distortions away from socially optimal groundwater extraction. To test the model’s key predictions, we leverage geophysical variation in the extent of extraction externalities and a US$1.35 billion groundwater management scheme that subsidized efficient irrigation technology. Consistent with the model's predictions, We find that the impact of the policy depends on the severity of extraction externalities: extraction falls by 9.2% in low-externality areas but rises by 11.0% in high-externality areas. Low-externality farmers maintain cultivation patterns with less groundwater input, while high-externality farmers cultivate the same land more intensively. Finally, consistent with groundwater being an over-exploited mechanism for climate resilience, we find divergent effects on farmers' ability to smooth water input over rainfall shocks: the program causes low-externality farmers to extract less when rainfall is normal and extract more during droughts, but it causes high-externality farmers to do the opposite. Our findings illustrate that the same common pool conditions that typically justify an intervention may also determine its welfare implications.