The overall goal of our paper is to examine how the evolution of groundwater governance in North China has affected the rural economy. Based on a random sample of 48 villages in nine counties in North China, our results show that over the last 15–20 years collectively owned tubewells have been gradually privatized. Our analyses demonstrate that increasing groundwater scarcity and policy intervention (mainly fiscal and financial subsidies for tubewell investment) have led to the observed shifts in tubewell ownership patterns. Our results also show that the privatization of tubewells has affected cropping patterns in North China. When villages shift towards private tubewells, farmers move into more water-sensitive and high-valued crops. Privatization, although having no effect on crop productivity in our sample, has a positive effect on income. Increased groundwater use is also shown to improve income distribution. However, the evolution of tubewell ownership in our study villages comes at a cost: increasing privatization is associated with falling water tables.

 

SCI