Irrigation and the spatial pattern of local economic development in India

We study the long-term impact of large-scale irrigation infrastructure on the composition of local economic activity in India. Our analysis uses high-resolution spatial data covering approximately 150,000 villages and towns and exploits spatial discontinuities in the coverage of irrigation projects. Irrigation increases agricultural output, wealth, and population density in rural villages. However, in towns it reduces population and nightlight density, the size of the non-agricultural sector, and large-firm activity. These results highlight the heterogeneous impacts that agricultural productivity gains can have on the patterns local economic development.