Does the water resource ‘fee to tax’ policy alleviate water poverty? Evidence from a quasi-natural experiment

Abstract

Abstract Levying a water resources tax policy which is called ‘fee to tax’ is a regulation formulated by China to restrain and alleviate water poverty. To test the effect of the water resources ‘fee to tax’, this research employs a multistage dynamic difference-in-differences (DID) model to explore whether the implementation of the policy can help alleviate water poverty based on panel data from 2009 to 2019. The results indicate the water poverty in western China is significantly more serious than in other regions and the implementation of the water resources tax policy significantly alleviates water poverty (the sign of the policy is positive and significant at the 1% level) in China. Additionally, the mechanism effects suggest that the policy can effectively restrain water poverty by reducing groundwater exploitation and optimizing the water utilization structure. In terms of spatial heterogeneity, the effect of the water resources tax policy on alleviating water poverty is stronger in central and eastern regions than in western regions. The conclusions of this study may, to some degree, serve as a basis to scientifically guide the implementation of China's water resources ‘fee to tax’ policy and, thus, effectively improve the level of water resources management.