Irrigation water rights trade and irrigation efficiency: evidence from China

As an important market‑oriented mechanism for allocating water resources, water rights trading has the potential to promote more efficient agricultural water use. Using city‑level panel data from China, this study first employs stochastic frontier analysis (SFA) to estimate irrigation efficiency. This study then applies a combination of difference‑in‑differences (DID) and event study approaches to identify the causal effect of irrigation water rights trading (IWRT) on irrigation efficiency. The empirical results show that IWRT leads to an average increase of 4.44% in irrigation efficiency. This finding remains robust after controlling for confounding policies and excluding cases involving water rights conversion. Heterogeneity analysis further reveals that the positive impact of IWRT is more pronounced in relatively arid regions and in areas characterized by small‑scale planting. Overall, these findings provide important policy implications for the design of water rights markets and for efforts to promote agricultural water conservation.