State Rights over Water and Agricultural Productivity: Evidence from the Krishna Basin

This paper analyzes the effects of intrastate water reallocation on agricultural productivity. Specifically, I look at the 1976 Krishna Water Dispute Tribunal that reallocated the rights of three Indian states over the Krishna River. I exploit districttime variation in access to water to obtain causal effects of water reallocation on crop output and yield. I find that on average, the decision reduces district output by 7.7 percent and yield by 5.5 percent. The weak negative net effects of the decision are comprised of productivity gains for the most downstream state, Andhra Pradesh, that are more than offset by the productivity losses for the upstream states Maharashtra and Karnataka. The negative impacts for Maharashtra, which are especially pronounced during periods of drought, are significant at conventional significance levels. Thus, the 1976 reallocation of state rights over water from the Krishna Basin was redistributive and weakly reduced overall efficiency.