Resource tax has been widely adopted in many countries. This paper evaluates the causal effect of reform of water resources tax on water resources performance in Hebei Province, China. By using the provincial panel data, we first measure the water resources performance of 21 provinces from 2008 to 2018 by considering the NDDF-ML method of undesirable output. We found that each province in China has gradually improved its water resources performance in the past 10 years, but there are great differences between regions. Then, we employ the synthetic control method, which allows us to consider the influence of unobservable time-varying factors to evaluate the policy effect. The results show that water performance index has increased significantly by 18.0%. The effect is mainly due to technological progress (17.3%) rather than technological efficiency (0.7%), which means no significant improvement in the allocation of water, and after placebo tests, our results are still robust. The DID approach shows a similar conclusion, but unobservable time-variation caused by other policies may lead to an overestimation of DID. In order to make good use of water resources, China should accelerate the reform of water resource taxes and pay more attention to the allocation of water resources.

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In China, official promotion evaluation based on economic performance motivates local governments to develop high economic growth targets, which has played an active role in boosting China’s economic growth in the past decades, whereas its environmental consequences have not been fully exploited. This paper finds that the economic growth target overweight has a stronger positive impact on the output of high-polluting industries than on the output of low-polluting industries, thus inducing more polluting activities. To deal with the issues of reverse causality and omitted variables bias, we take an instrumental variable approach. Examining mechanisms, we show that economic growth target overweight promotes polluting activities through the deregulation of the polluting activities in high-polluting industries. We also find an increase in the impact of the economic growth target overweight after the 2008 global economic crisis. Our study provides new evidence for explaining the dual presence of rapid economic growth and heavy environmental pollution in China.

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