Social welfare losses from groundwater over-extraction forsmall-scale agriculture in Sri Lanka: Environmental concern for landuse^✰

Quantity depletion and quality deterioration issues arising from the extraction of groundwater have been discussed in previous studies. However, the literature reveals no systematic analysis of the possible social welfare losses due to the cost of both quantity depletion and quality deterioration. This paper therefore investigates the long run welfare cost of using groundwater for agriculture by including both quantity depletion and quality deterioration costs simultaneously. This is achieved through an empirical study of onion farmers in Sri Lanka who use groundwater for their cultivation. A significant social welfare loss is found in terms of both groundwater quantity and quality deterioration costs and which is likely to increase over the long run. This is shown to have important long run implications for land use management.