Knowledge of the marginal productivity of water is crucial for decisions about its allocation between uses, which is particularly important in the context of increasing competition for water. Using primary, plot-level panel data, this article estimates the marginal productivity of water from supplementary irrigation in lowland rice systems in Cambodia, taking into account farmer and plot heterogeneity as well as self-selection of supplementary irrigation. Our estimates indicate a range of elasticities for rice output with respect to water inputs of between 0.057 and 0.069 for wet season production, substantially lower than previous estimates based on either aggregate or trial data. We discuss the policy implications of these results, in particular with respect to the utility of demand management policies and the challenges they pose to the decentralization of water management to Farmer Water Users Groups.
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