Deepening Economic Development Through Market Access: Evidence From Navigational Channel Regulation Works

ABSTRACT Inland waterways are vital for facilitating market access and promoting economic development worldwide. This paper explores this relationship by examining the impact of navigational channel regulation works on the Yangtze River mainstream, China's longest inland waterway. The regulation works, which deepened the channel for larger vessels, significantly enhanced market access. Our study is the first to utilize a proprietary panel dataset containing detailed monthly channel depth information for distinct segments of the Yangtze River, spanning 22 years in 110 cities. We find strong evidence that, between 1998 and 2019, the regulation works significantly boosted economic development in the Yangtze River Economic Belt (YEB)—a region designated as a national strategic priority. To address potential endogeneity and selection bias, we employ several robustness checks, including Propensity Score Matching combined with Difference‐in‐Differences (PSM‐DID) estimation. Specifically, cities along the main stretch of the Yangtze River experienced a more substantial increase in both per capita and aggregate GDP due to transportation cost savings, improved transport efficiency, as well as industrial agglomeration and expansion resulting from enhanced market access. Our findings provide novel causal evidence on the economic impacts of inland waterways and offer insights for policymakers engaged in waterway development globally.