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Abstract
Estimates regarding benefits to O&M investments help rationalize financial allocation decisions.
A distributed lag model is used to estimate the contribution to agricultural productivity of funds
utilized for O&M of the canal system in Pakistani Punjab. Estimated parameters are used to simulate
the effects of alternative O&M investment scenarios on agricultural output, farm prices and
income. Marginal benefits to past and prospective O&M investments in the canal irrigation system
were found to be fairly high, suggesting the need to allocate more funds for O&M of the canal
system. Results indicate that O&M investments yield substantial gains to both producers and consumers,
implying that funds required for O&M activities could be generated by taxing both these
segments of society.