How does water-resource reallocation affect economic development and grain production? Evidence from China's South-to-North water diversion project

Water-resource reallocation can alleviate regional water scarcity, but its implications for economic development and grain production may differ. Focusing on China's South-to-North Water Diversion Project (SNWDP), this study constructs an Economic Development-Grain Production Relative Trade-off Index (EGPRTI) to track relative changes in counties' shares of national GDP and grain output. A difference-in-differences (DID) design is applied to a county-level panel for 2001–2020. The baseline estimate indicates a 0.063-unit increase in EGPRTI in recipient counties. Separate estimates show a statistically significant positive GDP response, whereas the estimated response of total grain output is statistically insignificant. Additional analyses associate water delivery with urban expansion and industrial growth, alongside decreases in wheat-sown area share, cultivated land area, and farmland area. The estimated response of agriculture-related enterprise number is statistically insignificant. The estimated EGPRTI coefficient is 0.173 in non-major grain-producing counties and 0.004 in major grain-producing counties, with the latter statistically insignificant. The between-group difference of 0.169 is statistically significant. Causal interpretation remains conditional on the DID assumptions, given potential selection bias, time-varying confounding, and spatial spillovers. These findings highlight the relevance of considering coordination among water-transfer planning, agricultural water supply, cultivated-land protection, and grain-security objectives.