Cross-border Spillover Effects of Dams along International Rivers

Abstract

Hydropower dams on international rivers often trigger disputes due to neglecting externalities in downstream countries. Focusing on Chinese dams on the upper Mekong River, this paper examines the cross-border impacts of dams. Employing machine learning and difference-in-difference methods, we find that dam spillover effects depend on climate conditions. Under normal conditions, dams smooth water levels across seasons, boost agricultural productivity, and reduce fire risks. However, during extreme weather, dams' operations conflict with downstream interests, turning externalities negative and exacerbating damages in downstream countries. With the increasing frequency of extreme weather events, the negative cross-border impact may dominate.