Economic　growth　is　constrained　by　water　scarcity,　and　a　unified　policy　analysis　framework　is　required　to　enhance　the　coordinated　development　of　the　environ-economic　system　from　the　perspective　of　wastewater　management.　Thus,　a　multi-scale　water-economic　double　dividend　mechanism　model　(MWED)　is　first　developed　to　(i)　derive　strategies　for　simultaneously　achieving　water　scarcity　mitigation　and　economic　increase　through　compounding　wastewater　tax　(WT)　policies　and　reduced　value-added　tax　(RVT)　policies;　(ii)　explore　the　internal　response　mechanisms　at　the　sectoral　scale　in　the　central　region;　and　(iii)　reveal　the　responses　of　economic　output　and　multiple　water　resources　in　external　regions　under　the　cascading　effects.　This　integrated　approach　of　a　computable　general　equilibrium　model,　an　ecological　network　analysis,　and　a　multi-regional　input-output　analysis　is　applied　to　Shanxi　Province,　China,　a　representative　water-scarce　region.　The　double　dividend　strategies　of　WT_6　yuan/ton*RVT_2%,　WT_8　yuan/ton*RVT_2.5%,　and　WT_10　yuan/ton*RVT_3%　were　conducive　to　alleviating　water　scarcity　and　stimulating　economic　growth　by　adjusting　the　production　structures　or　upgrading　treatment　technologies　to　reduce　wastewater　discharge,　reducing　the　use　of　water-intensive　energy　sources　to　condense　direct　water　consumption,　and　enhancing　the　connection　between　low　water　consumption　sectors　and　advantageous　economic　sectors　to　optimize　the　virtual　water　network　structure.　Based　on　complex　inter-regional　relationships,　these　cascading　effects　can　stimulate　the　economic　output　of　other　provinces　and　alleviate　prevailing　water　scarcities　by　increasing　virtual　water　inflows　in　economically　developed　regions　and　decreasing　direct　water　consumption　in　economically　undeveloped　regions.　The　ability　of　water-rich　regions　to　reconcile　differences　in　water　resource　endowments　can　be　further　strengthened.