Abstract

Since 1985, Chile has provided subsidies for irrigation modernization under Law N degrees 18.450, aiming to expand irrigated areas and enhance water efficiency. While these measures seem necessary to address water scarcity, they may also increase water consumption by encouraging the incorporation of new cultivable areas, hindering aquifer recharge. This is particularly concerning since Chile has been experiencing a significant decline in precipitation since 2008, progressively reducing river flow levels. Focusing on the Maule Region and employing a two-stage regression model to address selection bias in irrigation subsidy applications, this manuscript estimates the impact of irrigation subsidies on river flow levels from 1987 to 2018. The results suggest that, in addition to the inherent effects of the country's drought conditions, the expansion of technified irrigation projects significantly decreases river flow levels. Thus, the state plays an active role in exacerbating the effects of drought in the agricultural territories of the Maule Region.