| Abstract: |
Large-scale hydropower dams are among the most costly and controversial
infrastructure projects, yet credible evidence on their regional economic
impacts is scarce. This paper provides the first quasi-experimental estimate
of the impact of the Three Gorges Project—the world’s largest dam—on regional
economic growth. Using a difference-in-differences design with county level
data, we find that the project raised GDP per capita in directly affected
counties (which account for 11.6% of China’s GDP) by 9.1%. These gains were
driven by improved navigation and trade, industrial land creation, and a
moderated local climate—not merely by increased electricity supply. The
project has also significantly accelerated the economic shift from agriculture
to industry and services. However, the benefits were starkly unequal:
downstream counties saw a 13.8% increase, while upstream counties experienced
negligible gains, a divergence explained by asymmetric changes in land avail
able for development. A cost-benefit analysis shows that considering only
direct power revenues yields a negative return (-65.5%), but incorporating
regional growth spillovers reveals a strongly positive return of 322.3%. Our
findings demonstrate that the economic justification for mega-dams hinges on
their indirect growth effects, which are large but spatially concentrated. |