Do incentives still matter for the reform of irrigation management in the Yellow River Basin in China?

- Panel data was collected in 2001 and 2005 and econometric models were established.
- After the early 2000s, irrigation management reform has accelerated.
- More Water User Associations (WUAs) chose not to establish incentive mechanisms.
- Incentive mechanisms on saving water is effective under contracting management.
- If incentives are provided to the contracting managers, the wheat yield declines.

SummaryUnder the pressure of increasing water shortages and the need to sustain the development of irrigated agriculture, since the middle of the 1990s, officials in the YRB have begun to push for the institutional reform of irrigation management. Based on a panel data set collected in 2001 and 2005 in the Yellow River Basin, the overall goal of this paper is to examine how the irrigation management reform has proceeded since the early 2000s and what the impacts are of the incentive mechanisms on water use and crop yields. The results show that after the early 2000s, irrigation management reform has accelerated. Different from contracting management, more Water User Associations (WUAs) chose not to establish incentive mechanisms. The econometric model results indicate that using incentive mechanisms to promote water savings is effective under the arrangement of contracting management and not effective under WUAs. However, if incentives are provided to the contracting managers, the wheat yield declines significantly. Our results imply that at the later stage of the reform, the cost of reducing water use by providing incentives to managers includes negative impacts on some crop yields. Therefore, how to design win-win supporting policies to ensure the healthy development of the irrigation management reform should be highly addressed by policy makers.