Drought, Farm Output and Heterogeneity: Evidence from Pakistan

Abstract

This article studies the impact of canal water use and communal ethnic heterogeneity on farm output during droughts. Categorizing villages where only one language is spoken as homogenous, and using a dummy variable that takes a value of one for households that use both tube-well and canal water and is zero for those that rely solely on canal water, this article performs a least squares analysis. The data are the 2001–2002 round of the Pakistan Panel Household Survey (PPHS), which was conducted during one of the worst droughts in Pakistan’s history. The main results of this article show that the negative effect of drought increases in the proportion of households affected in the village. Moreover, farms that have diversified irrigation are better off compared to those relying only on canal water, especially when residing in ethnically heterogeneous villages. The article concludes with policy prescriptions based on the interplay of common water resources, ethnic heterogeneity and water management.