Long-distance water infrastructure, rural development and urban growth: Evidence from China

Abstract

Water is unevenly distributed across regions, yet the effectiveness of long-distance water transfer in addressing this issue remains understudied. This paper employs a difference-in-difference design to examine the impact of the world’s largest water transfer project on water resources, rural development, and urban growth. We find that the project enhances water supply and agricultural production in water-receiving areas, while it leads to agricultural declines in water-sourcing areas. Such diverging patterns contribute to various consequences on labor market and rural welfare, thereby generating further differential impacts on nearby urban growth. The water-receiving areas witness urban expansion and economic activities thrive in the rural-urban fringe, but in the water-sourcing areas, economic activities decline outside the core urban areas. Further analysis reveals significant heterogeneity between the two water-transfer routes, distinguished by their engineering designs.