Water markets and water inequality: China's water rights trading pilot

Abstract

Water inequality could exacerbate global water scarcity due to the finite nature of water resources. Water markets aimed at overcoming failures in public water distribution systems may offer potential solutions to water inequality. However, existing studies failed to explain how water markets and water inequality are related. This study constructs a water inequality-water market conceptual framework to fill this gap. It examines the influence of water markets on water inequality in the context of China's Water Rights Trading Pilot. This study argues that water markets based on economic rationality can mitigate water inequality compared to command-and-control water policies. In addition, the mitigating effect of water markets on water inequality relies on changing the industrial structure, promoting technological innovation in irrigation, and improving recycled water use. Finally, the influence of water markets on water inequality tends to be heterogeneous depending on differences in economic development, precipitation, and water demand.