Water Marginal Benefit Analysis in the Recipient Area of Water Transfer Project from South to North

Huang-Huai-Hai River Basin, the recipient area of Water Transfer Project, is one of the most water-scarce territories in the world. Water resources already became the key factor to tie up the socioeconomic development. Therefore, to quantitatively analyze its contribution to national economy will be an important reference for the huge water diverting project evaluation. This paper calculates the output elasticity and marginal benefit of water by establishing Cobb-Dauglas production function for Huang-Huang-Hai and whole nation. The result shows the marginal benefit of Huang-Huai-Hai including agriculture is around 2.9yuan/m³, excluding agriculture is around 13.2 yuan/m³, which is higher than national average value. It can be predicted that the water marginal benefit will increases as scarcity of water, correspondently the GDP losses by water shortage will be intensified. Thus, implementing the diverting project will be a wise way to diminish the loss.