Investing in irrigation is often considered to be a viable approach to not only raising crop yields and farm incomes, but also mitigating the adverse effects of climate variability. This is particularly true in Malawi, where most of the economy depends on agriculture, and where frequent and severe droughts exacerbate poverty and food insecurity. Despite potential benefits, there are also concerns raised about irrigation’s apparent low profitability and its possible displacement of higher return investments. On Feb. 10, 2017, Dr. James Thurlow (Senior Research Fellow, IFPRI), presented on a new study from researchers at IFPRI and the Kiel Institute for the World Economy, which evaluates the impacts of undertaking irrigation investments in Malawi at the scale envisaged by the Irrigation Master Plan. Using an integrated modeling framework, the study evaluates the returns to irrigation arising through both economic and biophysical impact channels. More specifically, the study estimates irrigation’s returns from (1) raising crop yields; (2) reducing the effects of climate variability; and/or (3) allowing for a larger second or winter season crop. The study’s concludes that concerns over irrigation’s profitability are warranted, even under more generous assumptions about potential benefits. However, broader non-monetary benefits, such as greater food security, lower poverty, and reduced exposure to climate variability, may justify including irrigation within a national agricultural investment plan.

1. Evaluating Irrigation Investments
in Malawi
James Thurlow (IFPRI)
Coauthors: Franziska Schuenemann, Stefan Meyer, Ricky Robertson, Joao
Rodrigues and Manfred Zeller

2. Measuring Returns to Irrigation
• Evaluations typically rely on ex-post surveys comparing farmers
with irrigation to those without
• Good at capturing yield gains from irrigation (e.g., Dillion 2011)
• BUT irrigation’s benefits may arise via other channels:
• Permitting a new second “winter” season
• Reducing the adverse effects of climate variability
• Enhancing the effectiveness of other investments, e.g., fertilizer
• Need an ex-ante simulation “laboratory” for measuring returns
under varying weather conditions, etc.

3. Model-Based Approach
Economywide Impacts
RIAPA CGE model
Biophysical Outcomes
Crop yields
Economic Outcomes
e.g., GDP+, jobs, poverty, etc.
Crop Technologies
Spatial DSSAT crop models
Seeds, fertilizer, irrigation
and farm management
practices
Farm Investments
Historical temperature,
precipitation, solar
radiation, etc.
Weather Variability

4. Crop Models
• High resolution DSSAT models (0.5 x 0.5 degree grids)
• Maize, sorghum, rice, beans, groundnuts, soybeans, tomatoes, sugarcane
• Soil characteristics from World Soil Database
• 48 years of monthly weather (made daily using random weather generator)
• Two seasons simulated: Planting in November (summer) and April (winter)
• Daily irrigation triggered by threshold soil moisture (0.5mm or 1mm water)
• Irrigation simulated with and without 100kg of fertilizer per hectare
• Grid results aggregated to national level using SPAM dataset
• Preserve correlation in yield deviations across crops
• Impacts on other crops based on historical yield correlations
• Estimated using 52 year panel data with country fixed effects

5. Results: Estimated Maize Yield Gains
0
1
2
3
4
5
6
Rainfed with
fertilizer
Irrigated with
fertilier
Rainfed without
fertilizer
Irrigated without
fertilier
Maizeyield(tonsperhectare)
Irrigation effect
Fertilizer effect

6. Results: Yields of Other Selected Crops
No fertilizer
No irrigation
No fertilizer
With irrigation
With fertilizer
No irrigation
With fertilizer
With irrigation
Maize 0.85 1.09 3.33 4.73
Pulses 1.14 1.60 1.26 1.65
Groundnuts 2.66 3.19 2.68 3.22
Oilseeds 5.42 5.75 5.61 5.85
Vegetables 0.80 0.87 2.55 2.76
Maize 0.29 0.10 0.32 0.08
Pulses 0.36 0.26 0.31 0.23
Groundnuts 0.16 0.10 0.16 0.09
Oilseeds 0.10 0.06 0.10 0.06
Vegetables 0.14 0.10 0.12 0.12
Mean
yield
Standard
deviation
Crop yield (tons per hectare)

7. Economywide Model
• IFPRI’s Standard Static Model
• 2010 social accounting matrix
• Detailed economic structure
• 38 productive sectors
• 12 factors (land, labor, capital)
• 20 representative households
• Resource constraints
• Crop land and educated labor is fully-
employed (wages adjust)
• Less-educated workers are
unemployed (wages fixed)
• [[
• Flexible x-rate; fixed government
and investment spending
TradingFarming
Processing Non-AFS
Activities (producers)
Factor
markets
Product
markets
Government
Trade
Rest of world
Regional migration
& remittances
Aid
Investments & subsidies
Social transfers
Taxes
Rural
nonpoor
Rural
poor
Urban
poor
Urban
nonpoor
Households (consumers)

8. Two-Step Evaluation Procedure
T0 T1 T2
Baseline
equilibrium prior
to new irrigation
investments
Farmer (and economy)
allocates resources in
response to new irrigation
investments (economic
agents expect historical mean
weather patterns)
Random weather
realization is drawn from
the historical distribution,
and imposed on the
model, but resources are
now fixed (as per T1)
Results = Deviation in mean outcomes (across climate realization)
between T2 investment period and T0 baseline period

9. Four Sets of Scenarios
• Yield Gain
• 300,000 hectare irrigation expansion for summer crops
• No new lands implies equal reduction in summer rain-fed lands
• Second Season
• Above + 100,000 or 300,000 hectare expansion for winter crops
• Effectively new land brought under cultivation
• Reduced Variability
• Each of the above + randomly drawn weather realization
• Compared to a “no irrigation” baseline with same weather realization
• Fertilizer Interaction
• Each of the above + removal of fertilizer for maize crops
• Isolate interaction effect on average yield and reduced variability

10. Results: Yield Gain and Second Season
Summer 300k Winter 100k Winter 300k
Crop land area change 0 +100,000ha +300,000ha
Rain-fed land -300,000ha -300,000ha -300,000ha
Irrigated land +300,000ha +400,000ha +600,000ha
New jobs created +76,000 +115,000 +194,000
Value of Total GDP gain $48.0 mil. $76.6 mil. $128.4 mil.
Share from agric. 62% 72% 82.4%
Additional GDP growth 0.8% 1.2% 2.0%
Agriculture 1.4% 2.7% 5.1%
Crops 2.9% 5.1% 9.6%
Industry -1.0% -1.6% -2.8%
Agro-processing -1.9% -3.0% -5.6%
Services 0.9% 1.2% 1.6%
Trade 3.5% 4.8% 7.1%

11. Allocation of New Irrigated Land
Maize
Rice
Pulses
Oilseeds
Vegetables
Sugarcane
Existing irrigated areaNew irrigated area

12. Results: Reduced Variability
• 300 random weather events
• Smaller std. dev. in crop
yields = larger GDP gains
over time
• Irrigated crops have higher
yields and these gains are
more stable
• Average annual incremental
gain from lower variability =
• $11 mil. for Summer 300k
• $13 mil. for Winter 100k
• $17 mil. for Winter 300k
-50
0
50
100
150
200
250
300
350
400
450
Summer 300k Winter 100k Winter 300k
GDPgainrelativetoanon-irrigationbaseline($mil.)

13. Results: Fertilizer Interaction
• Maize yield gain from
irrigation…
• With fertilizer = 42%
• Without fertilizer = 28%
• Gains are larger under more
expansive irrigation
programs
• Summer 300k = $13 mil.
• Winter 300k = $24 mil.
• Clear synergies between
FISP and IMP
-50
0
50
100
150
200
250
Summer 300k Winter 100k Winter 300k
GDPgainrelativetoawithirrigationbutwithout
fertilizerscenario($mil.)

14. Decomposing Total Returns
Summer
300k
Winter
100k
Winter
300k
Winter minus
Summer
300k
Total GDP gain $48.0 mil. $76.6 mil. $128.4 mil. $80.4 mil.
Yield Gain 24.2 46.4 86.7 62.5
Variability 10.9 13.5 17.5 6.5
Fertilizer Interaction 12.9 16.8 24.3 11.4
Annual GDP gain per hectare $160 $255 $428 $268
30-year benefits $4798 $7664 $12840 $8042
• IMP estimates that $2.1 bil. initial infrastructure investment is
needed for 116,000 hectares ($18,500 per hectare)
• Further $2397 per hectare is needed for annual recurrent costs

15. Conclusion
• Investing in irrigation benefits the agricultural sector and the
broader economy
• 62% of max. benefits come from enabling a second season ($80 mil.)
• 19% come from yield gains on summer crops ($24 mil.)
• 10% are from interactions between fertilizer and irrigation ($13 mil.)
• 9% come from reducing the effects of climate variability ($11 mil.)
• BUT even with a sizable second season, irrigation may not be a
profitable investment (i.e., even if donors pay for infrastructure)
• Irrigation does have other benefits, which may justify its inclusion
in the national investment plan
• Reduces the effects of climate variability
• Enhances the returns to FISP