| Summary: | Increasing water scarcity will affect hundreds of millions of smallholder farmers in coming decades, but little is known about the likely forms of adaptation. This study exploits a natural experiment in which heterogeneous geological formations affect the rate of groundwater depletion across 40 villages in Gujarat, India, to provide novel evidence on this question. The analysis reveals that greater water scarcity leads to widespread declines in irrigated agriculture and enhanced migration to cities, but only among dominant socio-economic groups. No evidence is found of substantial compensating investments in water-efficient technologies or in human capital, despite farmers having long been aware of the decline in water levels.
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