Water Infrastructure and Grain Yield: Evidence From the South‐to‐North Water Diversion Project

ABSTRACT The South‐to‐North Water Diversion Project (SNWDP), the largest inter‐basin water transfer project in the world, was launched to address severe water shortages in northern China and to support agricultural production, ecological restoration, and urban development. This paper examines the impact of the SNWDP's central route on agricultural and ecological outcomes, with a particular focus on grain yield measured by the normalized difference vegetation index (NDVI). NDVI is used because it provides high‐frequency, fine‐resolution measures of vegetation health on both cropland and non‐cropland, allowing us to capture impacts on agricultural productivity as well as broader environmental conditions. Using a combination of difference‐in‐differences, instrumental variable estimation, and event study analysis, we find that the project significantly increases NDVI and grain yield. Further analysis shows that the project improves vegetation health more broadly by increasing the Leaf Area Index, surface water area, and soil moisture content, thereby confirming an enhanced water supply for irrigation and ecosystem support. These results highlight the effectiveness of large‐scale water diversion projects in improving both agricultural productivity and environmental conditions.