The Costs of Industrial Water Pollution to Agriculture in India

Industrial water pollution is high in many developing countries, but researchers and regulators have paid it less attention than air and domestic water pollution. I estimate the costs of industrial water pollution to agriculture in India, focusing on 63 industrial sites identified by the central government as “severely polluted.” I exploit the spatial discontinuity in pollution concentrations that these sites generate along a river. First, I show that these sites do in fact coincide with a large, discontinuous rise in pollutant concentrations in the nearest river. Then, I estimate that agricultural revenues are nine percent lower in districts immediately downstream of polluting sites, relative to districts immediately upstream of the same site in the same year, although confidence intervals exclude zero only when controlling for baseline characteristics. This effect appears to be driven by reduced yields per cropped land area and not factor reallocation. These results suggest that damages to agriculture could represent a major cost of water pollution and warrant further study. ∗Department of Economics, Massachusetts Institute of Technology. I thank Ben Olken and Esther Duflo for advice, as well as Simon Jäger, Abhijit Banerjee, Anant Sudarshan, Peter Hull, and Alex Oberg for helpful comments and discussions. I am grateful for financial support from the MIT Tata Center for Technology & Design.