Does Water Rights Trading Improve Agricultural Water Use Efficiency? Evidence from a Quasi-Natural Experiment

Abstract

Global water scarcity has emerged as a critical barrier to sustainable socio-economic development, stimulating water rights trading to serve as a policy instrument designed to enhance water use efficiency. This study systematically evaluates the impact of water rights trading (WRT) on agricultural water use efficiency (AWE) using panel data from 30 provinces (2011–2022) and a difference-in-difference (DID) model, while thoroughly investigating the underlying mechanisms and spatial spillover effects. The following are primary conclusions: (1) WRT significantly improves efficiency, reducing water consumption per unit of agricultural output by 4.5% in pilot regions, with robustness checks confirming reliability; (2) the policy’s effects on agricultural water use efficiency vary across regions; (3) mechanism analysis suggests that efficiency improvements are primarily driven by optimized crop planting patterns, adoption of water-saving irrigation technologies, advancements in agricultural mechanization, and strengthened environmental regulations; and (4) the policy exhibits notable spatial spillover effects. These findings contribute to the evaluation of WRT policy and offer practical insights for market-based water allocation reforms, suggesting further expansion of WRT with an emphasis on regional coordination and cross-regional cooperation mechanisms.