Does output market development affect irrigation water institutions? Insights from a case study in northern China

The main aim of this paper is to examine the impact of changing external conditions on irrigation water institutions in northern China. To this end, we perform a case study analysis of the impact of output market development on irrigation water transactions, using survey data collected among 315 households in Minle County, Zhangye City, Gansu Province, covering the year 2009. Households in this region possess tradable water use rights. Moreover, a major agro-processing company has recently been established and the local government intervenes in the allocation of water to stimulate farmers to grow a cash crop for that company. Despite these favourable enabling and driving factors, we find that market water trade is virtually absent. Instead, we observe that reciprocal water use arrangements (water swaps) have emerged at a limited scale. We argue that factors other than an improvement in the output market (such as producer ignorance, centrally set prices, trust) need to be considered, if improvement in the market for irrigation water is to occur.