The Effect of Water Rights Trading Policy on Water Resource Utilization Efficiency: Evidence from a Quasi-Natural Experiment in China

Abstract

Water shortage has become a serious problem in the world, and low water efficiency is the key to industrial and agricultural production and sustainable economic development. Based on the data of 30 provinces (municipalities) in China from 2010 to 2017, this study builds a DEA model based on the hybrid network structure of water systems to measure water resource utilization efficiency and uses a difference-in-differences (DID) model to examine the effects of the water rights trading policy on water resource utilization efficiency. We find that the water rights trading policy can significantly promote the total water efficiency of the water resources system and the initial water use efficiency, and after a series of robustness tests, the result is still valid. Further analysis indicates that the policy effect changes with the adjustment of the industrial and agricultural water use structure. Moreover, the dynamic impact of water rights trading policy on water resource utilization efficiency is still significant. This study provides macroscopic evidence for evaluating the effects of China’s water rights trading policy and offers new ideas and experiences for improving China’s water resource utilization efficiency.