Inter-basin water transfer policies and water-use technical efficiency: China?s South-North Water Transfer Project

Based on a quasi-natural experiment in China's South-North Water Transfer Project (SNWTP), this study adopts a difference-in-differences approach to scrutinise the effect of inter-basin water transfer (IBWT) policies on the water-use technical efficiency (WUTE). The findings show that IBWT can improve WUTE in water-receiving cities, but this is not related to the improvement in water endowment resulting from IBWT. Conversely, im-provements in water endowment further decrease WUTE. Moreover, IBWT can improve the water-saving ca-pacity and the intensity of environmental regulations in water-receiving cities, thus contributing to the sustainable improvement of WUTE from the input and the undesirable output. Finally, the effect of IBWT policies on WUTE is heterogeneous, depending on differences in economic and demographic elements. The WUTE estimation approach in this study contributes to an improved understanding of WUTE. This study also reveals a causal relationship between IBWT and WUTE, speaking to the ongoing debate on the relationship between IBWT, WUTE and water scarcity. Furthermore, this study adds to the understanding of the complex relationship be-tween IBWT and WUTE, and provides insights into the internal mechanisms of IBWT affecting WUTE.

Automated summary

This study uses the South-North Water Transfer Project in China as a quasi-natural experiment to examine the impact of inter-basin water transfer policies on water-use technical efficiency (WUTE). The findings suggest that inter-basin water transfer can improve WUTE in water-receiving cities, but this improvement is not directly linked to the enhancement of water endowment. Additionally, improvements in water endowment actually decrease WUTE. Furthermore, inter-basin water transfer can enhance water-saving capacity and environmental regulations in water-receiving cities, contributing to the sustainable improvement of WUTE. The effect of inter-basin water transfer policies on WUTE varies depending on economic and demographic factors.