Impact of access to irrigation on rural incomes and diversification: Evidence from China

Abstract

This study estimates the impacts of access to irrigation on farm income, household income and income diversification. We employ an endogenous switching regression (ESR) model to address the selection bias arising from both observed and unobserved factors and analyze cross-sectional data collected from Fujian, Henan, and Sichuan provinces in China. The Simpson index is used to measure household income diversification. The propensity score matching (PSM) model and control function approach are also used for comparison purpose. After controlling for the selection bias, we find that access to irrigation has a positive and statistically significant impact on rural incomes and diversification. The treatment effects of access to irrigation are to increase farm income, household income and income diversification by around 14%, 10% and 107%, respectively. The positive effects of access to irrigation are confirmed by the estimates of the PSM model and control function approach. Further analysis reveals that the irrigation effects on rural incomes and diversification are heterogeneous between small-scale and large-scale farmers and between male-headed and female-headed households.