Environmental Change, Water Scarcity, and Farmers' Differentiated Adaptations: Evidence from the Three Gorges Dam

We use the initial impoundment of the world's largest hydroelectric dam as a natural experiment to assess how dam-induced water scarcity was met with heterogeneous responses from households of varying endowments. In response to a persistent 12\% reduction in rice yields, the wealthier households (measured by the size of farmland or bank deposits prior to the dam) compensated by doubling the labor days for non-agricultural activities through out-migration, whereas the “poor” households increased the acreage of rice cultivation by 18.5-19.4\%. Our study confirms that one major obstacle for farmers to choose the more effective adaptation strategy is the wealth constraint.