Can water resource tax reform increase grain yield?—Evidence from China

Introduction Water plays an extremely important role in agricultural production. However, the impact of the water resource tax reform on grain yield has not yet been fully investigated. Methods Taking the pilot reform of water resource “fee-to-tax” as a quasi-natural experiment, we construct a panel dataset of Chinese prefecture-level cities from 2013 to 2019 and employ a multi-period difference-in-differences model, supplemented by double machine learning and a series of robustness tests, to identify the impact of the reform on grain yield. Results The results show that the water resource tax reform significantly increases grain yield. This finding remains robust after a battery of tests, including parallel trend tests, placebo tests, PSM-DID estimation, and the exclusion of special samples. Mechanism analysis indicates that the reform promotes grain yield mainly through two channels: reducing industrial pollution and stimulating green innovation. Specifically, the reform reduces industrial wastewater discharge, thereby improving agricultural production conditions, while also enhancing regional green innovation, which strengthens water-use efficiency and agricultural productivity. Heterogeneity analysis further shows that the grain-yield-enhancing effect is more pronounced in non-major grain-producing areas, regions with higher levels of digital economy development, and areas with stronger environmental regulation intensity. Discussion This study extends the evaluation of water resource tax reform from water-use and environmental performance to agricultural output, and provides empirical evidence for understanding the role of resource-based environmental taxation in promoting food security under rigid water constraints.