Environmental Change, Water Scarcity and Farmers' Differentiated Adaptations: Evidence from the Three Gorges Dam

Abstract

Using the 2003 initial impoundment of the world's largest hydroelectric dam as a natural experiment, we assess how rural households with varying endowments adapt differently to the dam-induced water scarcity in the downstream area. In response to a 13\% reduction in rice yields, those who are wealthier and more experienced in market transaction, and less constrained by access to credit, made up their income loss from agriculture by allocating 4.5-6 times more labor days (equivalent to 97 to 106 days per year) to non-agricultural activities, whereas the disadvantaged ones expanded the acreage of rice cultivation. These differential strategies adopted by these households resulted in widening income inequality.