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The effects of China's Sloping Land Conversion Program on agricultural households

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  • Zhen Liu
  • Arne Henningsen

Abstract

In the late 1990s, China aimed to mitigate environmental degradation from agricultural production activities by introducing the world's largest “Payments for Environmental Servicesˮ program: the Sloping Land Conversion Program (SLCP). We develop a microeconomic Agricultural Household Model, which can model the production, consumption, and nonfarm labor supply decisions of agricultural households in rural China in a theoretically consistent fashion. Based on this theoretical model, we derive an empirical specification, which we econometrically estimate using the Hausman–Taylor method and a large longitudinal farm household data set. The empirical results significantly differ between regions, but are generally consistent with the results of our theoretical comparative static analysis, for example, that the SLCP significantly decreases agricultural production. While the SLCP only increases nonfarm labor supply and total consumption in some regions, these effects could not be observed in others. The recent reduction of the SLCP compensation payment rates generally had negligible effects on agricultural production and off-farm work and only very small effects on household consumption.

Suggested Citation

  • Zhen Liu & Arne Henningsen, 2016. "The effects of China's Sloping Land Conversion Program on agricultural households," Agricultural Economics, International Association of Agricultural Economists, vol. 47(3), pages 295-307, May.
  • Handle: RePEc:bla:agecon:v:47:y:2016:i:3:p:295-307
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    File URL: http://hdl.handle.net/10.1111/agec.12230
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    Cited by:

    1. Mack, Gabriele & Kohler, Andreas, 2017. "Short- and long-run policy evaluation: support for grassland-based milk production in Switzerland," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 261116, European Association of Agricultural Economists.
    2. repec:eee:ecolec:v:156:y:2019:i:c:p:202-210 is not listed on IDEAS
    3. repec:eee:ecolec:v:149:y:2018:i:c:p:48-61 is not listed on IDEAS

    More about this item

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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