Reglas

Based on the literature and policy documents for China‘s irrigation

development goals, three outcomes are used to evaluate the village-level irrigation system performance.

5.5.1.1. Outcome (dependent) variables

First, to measure changes in agricultural water use under various fiscal management schemes, this study uses a measure of each village‘s seasonal water use for one crop common to all village in northern China, wheat. Based on data from 2001, 2004, and 2008, a rate for surface water use per wheat crop per hectare, per irrigation application each year in each village is systematically calculated (see Appendix C for crop water use and crop yield calculation procedures). The crop water use rate for wheat is based on number of seasons and amount of water applied

to the wheat crops in each village. Wheat crop water use is meant to capture changes in crop water use between years, and between villages due to changes in water

application and water allocation practices.

The next outcome measure is crop yields is based on village leaders‘ and surface water managers‘ accounts of annual wheat production in the village, volume (kilograms) of wheat produced per hectare of irrigated land is calculated. The third outcome variable is net annual per capita farmer income for each village, as reported by the village leader based upon his records for the previous year. This measure is used to measure changes in farmer income and evaluate the goal of poverty

alleviation. All incomes are normalized to real Yuan in the year 2000.

5.5.1.2. Explanatory Variables

Due to the diverse nature of fiscal policy for irrigation management, this study avoids uni-dimensionally measuring fiscal decentralization of village irrigation, and accomplishes this by following the tradition of other fiscal studies in using MRR as a proxy for the level of incentive faced by village irrigation leaders to generate and collect irrigation revenue, in addition to other fiscal policy decisions described below.

Marginal Retention Rate

One way to measure the degree of fiscal authority of villages is by looking at the share of irrigation revenue the village keeps and the share remitted to the

irrigation district, referred to as the MRR. In theory MRR increases discretionary spending power of local government (Oksenberg and Tong 1991; Oi 1992; Lin and

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Liu 2000; Fan, Zhang et al. 2002; Jin, Qian et al. 2005) and incentivizes revenue generation (such as collecting fees; adding ad hoc fees).

Several studies use the marginal retention of revenue to measure the degree of fiscal autonomy, or fiscal incentives, faced by provincial governments. MRR is used both as a fiscal policy measure utilized by central governments to grant local fiscal autonomy (Oksenberg and Tong 1991), as well as an empirical measure of fiscal decentralization defined as the share of locally collected budgetary revenue the local government is allowed to keep (Lin and Liu 2000; Akai and Sakata 2002). Lin and Liu go so far as to measure the degree of fiscal decentralization as the province‘s MRR.

MRR is calculated as the share of surface water irrigation fees retained by the village irrigation leadership, as a portion of total fees collected. Several scenarios may determine a village‘s MRR. It may be the case that the ID charges a determined fee, and the irrigation manager simply sets local fees above that in order to secure village funds for the irrigation system. Alternatively, the local irrigation

administration may designate a fee sharing arrangement, as common in other county- village fiscal arrangements (Oksenberg and Tong 1991), where no matter what absolute amount is collected, a pre-determined share of the proceeds will be retained by the village, and the remainder submitted to the ID. Although it is unclear who mandates the portion of fees retained by the village irrigation leadership, variation in the levels of MRR within villages and between villages is observed, and it is

hypothesized that higher levels of funds retained by the village allows for provision of goods and services closely tailored to the needs of villagers, and therefore will

result in better irrigation and agricultural system performance. Lastly, variables high marginal retention rate and investment per hectare are interacted to assess if

investment project performance varies when a village retains more funds for discretionary spending.

Other fiscal and water resource authority variables

In addition to MRR, the analysis includes a set of additional fiscal decision making dummy variables, indicating whether or not villages have authority over: 1) deciding irrigation fee levels, 2) collecting fees from farmers, 3) making village-level irrigation investments, and 4) signing irrigation –related contracts. To estimate the impact of water resource management on village outcomes, the analysis uses two dummy variables related to authority over water resource management: 1) whether or not village irrigation leaders decide village water allocation plan; and 2) whether or not village irrigation leaders coordinate delivery of water for village farms. The analysis will assess if these groups of variables impact village crop water use, crop yields and farmer income levels.

Control variables

Other control variables included in the models are irrigation management type, a few measures of village wealth including village enterprise income, gross surface water irrigation stock though the previous time period, whether or not farmers in the village invest private funds toward irrigation infrastructure and total surface water investment per hectare in the current time period. The analysis also controls for

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whether or not the village relies exclusively on surface water, instead of conjunctive use of surface and ground water sources, the number of laborers in the village, and sown area per capita in the village to measure if economies of scale are occurring related to production, water use and income. For the agricultural yields model, a dummy variable for soil quality is added indicating yes if the village has high soil quality. The hypotheses for variables with significant effects will be discussed in the results section.