Farm Level Effects of On-Farm Irrigation Infrastructure Programs in the Southern Murray–Darling Basin

Abstract

On-farm irrigation infrastructure programs have become an important method of recovering water for the environment in the Australian Murray–Darling Basin (MDB). These programs offer farmers funding to upgrade infrastructure in return for a portion of their water rights. This study measures the effects of Australian Government on-farm infrastructure programs in the southern MDB between 2009–2010 and 2016–2017, particularly the On-Farm Irrigation Efficiency Program. A novel dataset is constructed combining program administrative data with farm survey data. This data is used to derive econometric estimates on the effects of these programs on various measures of farm productivity, profitability and water demand. On-farm programs are found to have positive effects for participants in terms of higher farm productivity and profitability. However, the study also finds a Jevon's paradox outcome, where farm demand for water is significantly higher post-upgrade.