Quasi-experimental analysis reveals that water rights trading increases food production in China, suggesting market-based allocation improves food security.
The water rights trading market (WRM) acts as a policy tool to enhance water resources allocation efficiency. However, how WRM affects food production deserves further exploration. This study examines whether WRM affects food production and through which channels this effect may operate. Using WRM policy as a quasi-natural experiment, this study investigates the role of WRM in food production in China. The results show that WRM can expand the grain sown area and enhance the efficiency of production factor allocation, thus increasing food production. Meanwhile, the grain-increasing effect of WRM does not lead to excessive water consumption. The heterogeneity discussion shows that the impact of WRM is more obvious in the south and the regions with high disaster rates and abundant water resources. More importantly, compared with provincial WRM, national WRM plays a particularly positive role in increasing food production. Furthermore, the development of factor marketization can better exert the positive impact of WRM, but government intervention will weaken the positive impact of WRM. In short, these findings are valuable for developing countries to develop WRM and improve food security.
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Ouyang et al. (2026) studied this question.
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