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Environmental Kuznets Curve for Irrigation and its Implications for Future Water Demands:

Author(s): a 20-years of Cross-Country Analysis for 65 Tropical countries
IWRA World Water Congress 2008 Montpellier France
2. Towards the Future: Water Resources and Global Changes
Contact address of the corresponding author Dr. Madhusudan Bhattarai Agricultural Economist P. O. Box 42, Shanhua, Tainan, Taiwan 74199, ROC Phone: (+886-6) 583-7801 Fax : (+886-6) 583- 0009 Email: madhu.Bhattarai@netra.avrdc.org.tw

Keyword(s): Environmental Kuznets Curve for Irrigation, Irrigation Demand, Population Growth, Economic Development, Global Irrigation Modelling, Asia, Africa, Latin America, Cross-countries Analysis

Abstract Introduction: This paper verifies an existence of the Environmental Kuznets Curve (EKC) hypothesis for irrigation. The EKC hypothesis suggests for an inverse U- shaped (or concave) relationship between the level of environmental degradation and income in a given society. It also implies that some form of environmental deterioration appears inevitable during the initial stage of development, but subsequent increases in the social income would generate enough incentives to improve the environmental quality. In line with this reasoning, the EKC relationship for irrigation (referred to here as Irrigation Kuznets Curve, or IKC) is hypothesized suggesting that the demand for irrigation is greater at the initial stage of development and that irrigation demand declines as social income increases. This process subsequently gives rise to an inverted U-shaped relationship between the level of irrigation and the level of income. This information on EKC for irrigation has large implications on policy planning for irrigation and for analyzing demand for irrigation, and water uses and water reallocations across sectors. Objective: The major objective of this study is to empirically verify the presence of the EKC relationship for irrigation and to illustrate its policy implications. Subsequently, it also evaluates: i) the impact of selected macroeconomic policy, structural and governance related factors (population, energy use, technological change) affecting the irrigation-income relationship across the countries; ii) analyze policy implications of the empirical findings on EKC for future demand for irrigation and demand for water resources, in general. Methods: In this study, the EKC hypothesis for irrigation (i.e., IKC) is examined across 66 tropical countries from Asia, Africa and Latin America using national-level annual data from 1972 to 1991. The IKC model is once estimated for 66 tropical countries, and separately for 13 countries from Asia where more than two-thirds of the global irrigated land is located. Two measures of irrigation are used, “percentage of crop area irrigated” and “relative change in net irrigated area.” In addition to estimating irrigation and income relationship, effects of other broad-level institutions and policy factors on irrigation are also analyzed such as governance (sum total of political and civil liberty indices), cereal yield, agricultural value added, manufacturing value added growth, rural population density, economic growth rate, and per capita electricity use. Results, Conclusions, and Policy Implications The empirical results provide strong evidence for the existence of an EKC relationship for the two measures of irrigation used, and for both the tropical-global and the Asia EKC models. This means that the pace of irrigation development is faster at the initial stage of a country’s development and that it will be at a slower rate at the later stage of development. The empirical findings also imply that there is no leapfrogging in the process of irrigation and agricultural development and management of natural resources in an economy. The non-linear relationship (elasticity value) estimated between irrigation and a nation’s income has profound impacts for better forecasting irrigated-area (and water demand) in an economy, as opposed to the zero-income elasticity of irrigation assumed in most past studies. Irrigation area and water-demand analyses are so far mostly based upon per capita requirement type of forecast-modeling technique, which ignores the underlying income effects and societal substitutional behavior over resources use decisions as shown in IKC modeling here. The study findings contribute significantly in global debates on water and assessment on future water needs.
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