The Agricultural and Economic Impacts of Massive Water Diversion

60 Pages Posted: 19 Jan 2024

See all articles by Guangbo Huang

Guangbo Huang

Peking University - Institute of New Structural Economics (INSE)

Chong Liu

Peking University

Tianyang Xi

National School of Development, Peking University

Huayu Xu

Peking University - National School of Development

Wei You

Peking University

Date Written: October 11, 2023

Abstract

We investigate the agricultural and economic impacts of China’s South-North Water Diversion Project, a massive initiative that aims to alleviate water scarcity in the country’s northern regions by channeling water from the Yangtze River over distances exceeding 1,400 kilometers. Employing a difference-in-difference approach with county-level panel data, our findings reveal that the project contributes to an 8.2 percent increase in total grain output and a 4.7 percent boost in agricultural productivity. Furthermore, the project mitigates the adverse effects of drought shocks, leading to a modest increase in local incomes. Notably, water-donating counties in the downstream Yangtze River Basin, which are abundant in water resources, do not experience discernible losses due to the project. Back-of-the-envelope calculations indicate an internal rate of return of approximately 6 percent, highlighting the project’s economic viability.

Keywords: water scarcity, China’s South-North Water Diversion Project, agricultural productivity, regional development, drought conditions

JEL Classification: O13, O18, Q15, Q25, Q28

Suggested Citation

Huang, Guangbo and Liu, Chong and Xi, Tianyang and Xu, Huayu and You, Wei, The Agricultural and Economic Impacts of Massive Water Diversion (October 11, 2023). Available at SSRN: https://ssrn.com/abstract=4679022 or http://dx.doi.org/10.2139/ssrn.4679022

Guangbo Huang

Peking University - Institute of New Structural Economics (INSE) ( email )

Chong Liu

Peking University ( email )

5 Yiheyuan Road, Haidian District
Beijing, Beijing 100871
China

Tianyang Xi

National School of Development, Peking University ( email )

Beijing, 100871
China
01062766681 (Phone)
100871 (Fax)

Huayu Xu (Contact Author)

Peking University - National School of Development ( email )

Beijing, 100871
China

Wei You

Peking University ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, 100871
China

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