water Article The Drag Effect of Water Resources on China’s Regional Economic Growth: Analysis Based on the Temporal and Spatial Dimensions Yao Zhang 1, Wenxin Liu 1 and Minjuan Zhao 1,* College of Economics and Management, Northwest A&F University, Taicheng Road, Yangling 712100, China; [email protected] (Y.Z.); [email protected] (W.L.) * Correspondence: [email protected] Received: 4 December 2019; Accepted: 16 January 2020; Published: 17 January 2020 Abstract: Studying the influencing factors of the drag effect of water resources and its temporal–spatial variation can help governments to solve the problem of water resource constraints on the economic growth of different regions. Based on Romer’s hypothesis, this paper uses panel data to empirically analyze the drag effect of water resources in China’s 31 provinces from 1987 to 2017. The research shows that: (1) Water resources have certain constraints on the economic growth of each region. Regional economic growth has declined by 0.23% (eastern), 0.07% (western), 0.43% (central) and 0.09% (northeastern) annually. (2) In provinces with rapid labor growth, water resources have a greater impact on economic growth. In provinces with low labor growth rates, the drag effect of water resources on economic growth is affected by the capital stock of the region. (3) Through the analysis of the water drag effect in different time periods, this paper finds that in some periods, the government’s mobilization of water resources for the economic growth in some regions will not only promote the transfer of labor between regions, but also cause changes in the regional water resources. According to the results of this paper, the following conclusions can be drawn: (1) It is necessary to vigorously develop water-saving agriculture, improve technical efficiency, and reduce the strong dependence of economic growth on water resources in the provinces which has a strong water drag effect on economic growth; (2) Provinces with moderate water resource constraints should take the lead in deploying strategic emerging industries, and accelerate the development of the tertiary industry; (3) Provinces with weakly water resource restrictions can promote the development of capital-based industries. Not only can the development of the economy be rational, but it can also reduce the economy’s dependence on resources, thereby achieving the sustainable use of water resources and sustainable economic growth. Keywords: drag effect; regional economic growth; virtual water; Solow Growth model 1. Introduction Water resources are an important material basis for human survival and a necessary strategic resource for social and economic growth [1]. In recent years, China’s economy has developed rapidly, with an average annual growth rate of nearly 10% [2]. In 2017, China’s total GDP exceeded 80 trillion yuan, accounting for 15% of the world economy. China’s economic growth miracle has been coupled with the increasing pressures of limited resources [3]. While China has a vast territory, its population accounts for 22% of the world’s total population. The per capita water resources are only 27% of the world’s per capita level, which is far below the world average [4]. The lack of water and the uneven distribution of water resources in time and space are China’s basic national conditions and water conditions. Water shortages, serious water pollution, and the deterioration of water ecology are Water 2020, 12, 266; doi:10.3390/w12010266 www.mdpi.com/journal/water Water 2020, 12, 266 2 of 19 prominent issues and have become the main bottleneck restricting sustainable economic and social development [5]. There is a contradiction between limited water resources and economic growth. At the same time, the high consumption of water resources and the high dependence of economic growth on water resources have also affected stable economic growth [6]. Nowadays, the regional differences in economic growth in China are becoming more and more obvious, and the imbalance in regional development has become a realistic problem in the process of regional economic growth in China [7]. In this context, studying the drag effect of water resources on the economic growth of various regions in China in order to allow for a balance between the maximum economic growth and minimum water consumption is of great significance in connection with achieving the sustainable use of water resources, improving the quality of economic growth, and narrowing regional disparities. The “drag effect model” is used to analyze the impact of water resources on economic growth [8] The earliest research on the “drag effect” mainly involved introducing economic growth models or production functions to analyze the impact mechanism of resource constraints on the economy [9–11]. Dasgupta et al. [8,9] suggest that non-renewable resources will have a drag effect on economic growth and that economic growth can only achieve steady growth when non-renewable resources are not important for production. Nordhaus [10] uses the extended Cobb–Douglas production function to study the drag effect. This production function study found that the US economy is reduced by about 0.24% per year due to the constraints of various resources, such as land. Bruvoll et al. [11] found that the resources’ drag effect caused some losses to Norwegian social welfare. The constraints of resources and environment on economic growth are increasingly evident and hinder the promotion of sustainable economic growth and social welfare [10–12]. Over the past 30 years, the inputs of water resources have been the engine of China’s economic growth and have made important contributions to sustainable and rapid economic growth in the country’s metropolitan areas. Some scholars also analyzed and studied the drag effect of water resources on China’s economic growth based on the Romer’s [8] hypothesis and found that the constraints of water resources on China’s economic growth are widespread. Based on this study, this article poses the following questions: What is the extent of the drag effect of water resources on economic growth in China’s eastern, western, central, and northeastern regions? What is the difference between the provinces in each region? How did the drag effect of water resources on the economic growth in different regions change from 1987 to 2017? Does the change in the drag effect in different periods have a certain relationship with the implementation of policies in this period? By combing the relevant literature, it was found that the existing research on the drag effect of water resources on economic growth has three main aspects. Firstly, due to the different perspectives and focus of the indicators, the existing research on the measurement of the drag effect of water resources results shows different results [6,13–16]. Water resources include agricultural water (water from agricultural products), consumption water (water for household use), industry water (water for industry use), and ecological water (water for ecological use). Among them, agricultural water accounts for 65% of the total water, but the current statistical methods for agricultural water use are too rough. Virtual water can accurately measure and express agricultural water use, which has been recognized by most scholars [17,18]. Based on this, this paper uses the crop virtual water [19], consumption water, industry water, and ecological water consumption to assess the amount of water resources in order to more accurately evaluate the drag effect of water resources on economic growth. Secondly, the existing research on the drag effect of water resources on China’s economic growth is divided into the national level [6,20,21] and, to some extent, the regional level [16]. Does the uneven distribution of water resources in different regions of China lead to different economic growth speeds in different regions? If so, what is the difference between the impacts of water resources on the economic growth in different regions? What is the reason? Answers to these questions will provide useful guidance for economic growth in different regions. Thirdly, the existing research focuses on the drag effect of water resources on China’s economic growth mainly during a certain period of time [2,6,20], and research on the dynamic drag effect of different time periods is lacking. Economic growth and the Water 2019, 11, x FOR PEER REVIEW 3 of 20 Water 2020, 12, 266 3 of 19 [2,6,20], and research on the dynamic drag effect of different time periods is lacking. Economic growth and the utilization of water resources constitute a dynamic process. 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