A TALE OF TWO ROADS: GROUNDWATER DEPLETION IN THE NORTH CHINA PLAIN

We instrument the distance of each well to the actual placement of the highway with the distance from the well to the virtual straight line joining the two cities outside the county that the highway actually connects. [...] The parameter of interest is given by β3, the coefficient on the interaction term, we expect to be positive (as predicted by the theoretical model), and gives the change in the number of new wells in a treatment cell after the construction of the new highway. [...] The coefficients shown in this graph are obtained by regressing the dependent variable on a trend and the interaction of the trend with the treatment and the usual fixed effects over the period preceding the construc- tion of the highway, i.e., for the period 1980-98.20 The coefficient on the interaction term is statistically insignificant up to almost a 3 km treatment area, confirming the common. [...] At 500 m the number of treated cells is 238, representing only the 1.36% of the total, when we increase the treated area to 4000 meters the number of cells in the treated area increases to 1,540, the 11.38% of the cells in the estimation. [...] Fourth, we introduce the “old” roads into the sample, and fifth, we replace the minimum distance to the road with the distance to the actual location of the entrance/exit ramp on the highway.