Retaining population with water? Irrigation policies and depopulation in Spain over the long term

Depopulation, especially, but not only, rural, has become a major concern across many advanced and developing economies. This is particularly relevant in Spain, a country also characterized by severe environmental constraints on agricultural growth. As one type of place-based policy, irrigation programs have been claimed to contribute to resettling populations and reducing outward migration, by increasing agricultural output, productivity, competitiveness and, consequently, employment and the standard of living. However, no evaluation of the causal effect of irrigation, a heavily used policy both historically and currently, on population has been conducted to date. This article aims to elucidate on this relationship, using municipal-level data over the period 1910-2011 and exploiting a staggered difference-in-differences design. Thus, we engage with a recent literature that has turned to the use of historical data to analyze spatial aspects of economic activity, as long-term databases can offer better insights than modern data alone, notably in policy evaluation. Overall, we find a positive and significant effect on population only for irrigation developments that started in the relatively distant past. At the same time, we find stronger effects in some types of municipalities. In any case, effects are temporary or tend to level off. The results also show that one way of overcoming diminishing returns of irrigation over time is to greatly increase its intensity. However, there are trade-offs. We discuss the policy implications of the findings in light of current policies, and in terms of environmental and economic costs of increasing the intensity of irrigation.