No water, no gain: The impact of large-scale water transfers on urban land markets

This study examines the impact of water availability on the urban land market by focusing on a large-scale inter-basin water transfer project in China. Employing a difference-in-differences framework and a unique parcel-level dataset, we find that the project increased average land prices in water-receiving areas by 8.47% while also stimulating urban land market activity, and ultimately promote urban economic growth and expansion. These effects are primarily driven by two channels: population growth and mobility, and accelerated industrial expansion—all induced by the large-scale water transfer. Additional analyses further reveal that the project’s influence on land price is almost entirely concentrated in residential and commercial land parcels, with negligible effects observed for industrial land. And the positive impacts are more pronounced along the project’s middle route and in arid counties. Notably, we find no empirical evidence of adverse effects on land markets in water-supplying areas. A back-of-the-envelope calculation suggests that the appreciation in land values could recoup over one-third of the project’s total investment, underscoring its substantial economic benefits.