The effect of restricting groundwater exploitation on agriculture: Evidence from Huang-Huai-Hai region, China

Abstract

Food security and groundwater conservation may conflict with each other due to high irrigation demands. This study aims to identify how groundwater conservation policies affect agriculture and the mechanisms of long-term adaptation. Our framework aggregates the stochastic frontier analysis, dynamic panel fixed effects model, and long-difference approach to evaluate the impact of restricting groundwater exploitation on agricultural total factor productivity, agricultural inputs, and outputs in the Huang-Huai-Hai area of China. The results demonstrate that, in the short run, the reduction in groundwater exploitation has a negative impact on agricultural total factor productivity, fertilizer and machines but promotes water input, which results in a more negative effect on agricultural output measured by yield. In the long term, restricting groundwater exploitation still implies a loss of agriculture. However, the long-run adaptation offsets 75% and 64% of the short-run effects on total factor productivity and yield, respectively. Despite more flexible adjustment in fertilizer and machines, long-term adaptation mitigates yield losses to a lesser extent than TFP due to water use constraints.