How do smallholder farmers adapt to water scarcity? Evidence from the three Gorges Dam

Using the initial impoundment of the world’s largest hydroelectric dam as a natural experiment, we assess how farming households adapt to dam-induced seasonal water scarcity. We find that the impoundment of the TGD for power generation has altered the Yangtze River’s water cycle, seasonally reducing downstream water supply and causing rice yields to fall. In response to a persistent 12% decline in yields, subsistence households primarily expanded their farming area to maintain total output. While some households reallocated labor to non-agricultural sectors, this adaptation was significantly constrained by wealth endowment.