China’s efforts to improve water quality delivered major environmental benefits but also weakened agricultural economies in the communities facing the greatest regulatory pressure, according to new Cornell University research.

More than 20 years ago, the Chinese government instituted the Scientific Outlook on Development program, tying local leaders’ job performance evaluations to environmental quality improvements, with more than 350 river monitoring stations measuring success. However, the stations only identified pollution from upstream agricultural sources, placing the burden of compliance on those farms and individuals.

Upstream counties saw “agricultural value added” — the net economic output from farming, forestry, livestock, and fisheries — drop by 58%, the study found. Those counties also hired fewer agricultural workers, cultivated less land, and applied less fertilizer, all signs of a weakened agricultural economy; downstream farms were not affected.

“If you’re just looking at the core objectives of China’s environmental policy, it’s remarkably successful,” said senior author Wendong Zhang, associate professor of applied economics and management, “but underlying these very significant successes, there are also important, nuanced trade-offs.”

Zhang and his team used a spatial regression discontinuity design, treating the upstream/downstream boundary as a natural dividing line, to calculate the policy’s effects across 462 counties spanning China’s major river basins over two decades. The study also found that people with rural household registration, known as “hukou,” were significantly more likely to migrate out of upstream counties following the reform, suggesting farming families bore the highest costs of the regulatory squeeze.

The study did find an environmental upside: upstream counties saw measurable reductions in nitrous oxide emissions from farmland soils and livestock manure, a meaningful climate benefit. “Borders matter,” Zhang said, referring to the sharp divide in regulatory enforcement between counties just upstream versus just downstream of monitoring stations, adding that trade-offs between environmental concerns and the agricultural economy have to be considered.

Journal: Journal of Environmental Economics and Management
DOI: 10.1016/j.jeem.2026.103380
Article Title: Impact of water quality regulation on the agricultural economy in China
Publication Date: June 19, 2026

Source: EurekAlert