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The role of non-farm incomes in reducing rural poverty and inequality in China

  • de Janvry, Alain

    ()

    (University of California, Berkeley. Dept of agricultural and resource economics and policy)

  • Sadoulet, Elisabeth

    ()

    (University of California, Berkeley. Dept of agricultural and resource economics and policy)

  • Zhu, Nong

China’s record in reducing rural poverty has been nothing short of spectacular and should be a source of lessons for other countries. Rural poverty reduction is generally sought in the role of agriculture in contributing to farm incomes. However, non-farm employment in rural areas can also be a major contributor. Using detailed household survey data from Hubei province, we simulate the counterfactual of what rural households’ incomes, poverty, and inequality would be in the absence of access to non-farm sources of income. Results show that, without non-farm employment, rural poverty would be much higher and deeper, and that income inequality would be higher as well. We find that education, proximity to town, neighborhood effects, and village effects are crucial in helping particular households gain access to these opportunities. We also find that those who stay as pure farmers have non-observable characteristics that make them much more productive in agriculture, implying positive selection on these characteristics. Moreover, participation in non-farm activities has a positive spillover effect on household farm production.

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File URL: http://repositories.cdlib.org/are_ucb/1001
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Paper provided by University of California at Berkeley, Department of Agricultural and Resource Economics and Policy in its series CUDARE Working Paper Series with number 1001.

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Length: 30 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:are:cudare:1001
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  1. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  2. Knight, John & Song, Lina, 1993. "The Spatial Contribution to Income Inequality in Rural China," Cambridge Journal of Economics, Oxford University Press, vol. 17(2), pages 195-213, June.
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