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Unintended effects of water regulation on household livelihood: evidence from China

ABSTRACT This study examines the unintended effects of the water regulation on household livelihood in China, from the perspective of Engel coefficient. Applying county-level water regulation dataset and CFPS household dataset in a difference-in-difference-difference (DDD) specification, the research finds that the regulation increases the Engel coefficient by an additional 2.6%. Mechanism analyses show that water regulation influences the Engel coefficient through increasing household food expenditure, as it also causes local market fluctuations in meat products. Overall, this study sheds new light on the economic costs of environmental regulation.