Abstract: There is a vast rain-fed agricultural (dryland farming) region in the Northwest China, with low and unstable yield. Water shortage is the main restriction responsible for low crop yield. It is well known that surface application of PAM (Polyacrylamide) can increase rainfall infiltration, which increases crop yield. The objective of this study was to investigate the economic feasibility of applying PAM in rain-fed agriculture, through theoretical analysis and with experimental data. From crop water production function, the relationship between increased infiltration of rainfall through PAM application and the increased yield was developed. Experimental data were used to quantify the increased water availability to crop under PAM treatment. A function was derived for computing the economical benefits of PAM application under different conditions, such as annual precipitation, the ratio of crop price to PAM cost. The relevant data were used to calculate the economic benefit of using PAM in corn production. The results indicate that PAM application in corn has sound economic return, which demonstrate great potential of using PAM in rain-fed agriculture in the loess regions of North Western China.