Policy effects of water rights trading (WRT)

Abstract

China's emphasis on rapid economic growth in the past years has led to irrational exploitation and utilization of water resources. Water rights trading (WRT), as an important initiative carried out by the Chinese government, has been implemented for eight years but mainly in some pilot provinces. In this paper, a multi-point difference-in-difference model is constructed to study the causality of WRT policies in China from 2012 to 2021 and verifies the scientific validity of the research results through parallelism test, time and individual placebo test, endogeneity test of Logit reverse causality, and robustness test. The impact of the WRT system on the utlization efficiency of water resources, as well as its mechanism and heterogeneity characteristics, is mainly explored. The research results demonstrate that WRT helps to improve the utilization efficiency of water resources in polot provinces, which is even more pronounced in the presence of government expenditures. In addition, the effect of WRT implementation is signigicantly related to regional industrial technological empowerment and residents' awareness of environmental protection and insignificantly related to regional agricultural sophistication. The findings of this study will provide empirical support for the Chinese government's local strategy of establishing a unified national WRT market.