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The Role of Non-Farm Incomes in Reducing Rural Poverty and Inequality in China

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  • de Janvry, Alain
  • Sadoulet, Elisabeth
  • Zhu, Nong

Abstract

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.

Suggested Citation

  • de Janvry, Alain & Sadoulet, Elisabeth & Zhu, Nong, 2005. "The Role of Non-Farm Incomes in Reducing Rural Poverty and Inequality in China," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7ts2z766, Department of Agricultural & Resource Economics, UC Berkeley.
  • Handle: RePEc:cdl:agrebk:qt7ts2z766
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    Cited by:

    1. Nong Zhu & Xubei Luo, 2010. "The impact of migration on rural poverty and inequality: a case study in China," Agricultural Economics, International Association of Agricultural Economists, vol. 41(2), pages 191-204, March.
    2. Francesca Marchetta, 2008. "Migration and non farm activities as income diversification strategies: the case of Northern Ghana," Working Papers - Economics wp2008_16.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    3. Winters, Paul & Davis, Benjamin & Carletto, Gero & Covarrubias, Katia & Quiñones, Esteban J. & Zezza, Alberto & Azzarri, Carlo & Stamoulis, Kostas, 2009. "Assets, Activities and Rural Income Generation: Evidence from a Multicountry Analysis," World Development, Elsevier, vol. 37(9), pages 1435-1452, September.
    4. repec:eee:wdevel:v:95:y:2017:i:c:p:231-253 is not listed on IDEAS
    5. Chen, Xuan & Chen, Jing & Huang, Chien-Yu, 2016. "Assessing Off-farm Employment Decisions of Rural Households in China," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 236262, Agricultural and Applied Economics Association.
    6. You, Jing, 2014. "Risk, under-investment in agricultural assets and dynamic asset poverty in rural China," China Economic Review, Elsevier, vol. 29(C), pages 27-45.
    7. Benjamin Davis & Paul Winters & Thomas Reardon & Kostas Stamoulis, 2009. "Rural nonfarm employment and farming: household-level linkages," Agricultural Economics, International Association of Agricultural Economists, vol. 40(2), pages 119-123, March.
    8. Grosjean, Pauline & Kontoleon, Andreas, 2009. "How Sustainable are Sustainable Development Programs? The Case of the Sloping Land Conversion Program in China," World Development, Elsevier, vol. 37(1), pages 268-285, January.
    9. Tom Hertz, 2009. "The effect of nonfarm income on investment in Bulgarian family farming," Agricultural Economics, International Association of Agricultural Economists, vol. 40(2), pages 161-176, March.
    10. Omilola, Babatunde, 2009. "Rural non-farm income and inequality in Nigeria:," IFPRI discussion papers 899, International Food Policy Research Institute (IFPRI).
    11. Hoang, Trung X. & Pham, Cong S. & Ulubaşoğlu, Mehmet A., 2014. "Non-Farm Activity, Household Expenditure, and Poverty Reduction in Rural Vietnam: 2002–2008," World Development, Elsevier, vol. 64(C), pages 554-568.
    12. Imai, Katsushi S. & Gaiha, Raghav & Thapa, Ganesh, 2015. "Does non-farm sector employment reduce rural poverty and vulnerability? Evidence from Vietnam and India," Journal of Asian Economics, Elsevier, pages 47-61.
    13. Benjamin Tetteh Anang, 2017. "Effect of non-farm work on agricultural productivity: Empirical evidence from northern Ghana," WIDER Working Paper Series 038, World Institute for Development Economic Research (UNU-WIDER).
    14. Hogarth, Nicholas J. & Belcher, Brian & Campbell, Bruce & Stacey, Natasha, 2013. "The Role of Forest-Related Income in Household Economies and Rural Livelihoods in the Border-Region of Southern China," World Development, Elsevier, vol. 43(C), pages 111-123.
    15. Birthal, Pratap Singh & Negi, Digvijay S. & Jha, Awadesh K. & Singh, Dhiraj, 2014. "Income Sources of Farm Households in India: Determinants, Distributional Consequences and Policy Implications," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 27(1).
    16. Davis, Benjamin & Winters, Paul & Carletto, Gero & Covarrubias, Katia & Quiñones, Esteban J. & Zezza, Alberto & Stamoulis, Kostas & Azzarri, Carlo & DiGiuseppe, Stefania, 2010. "A Cross-Country Comparison of Rural Income Generating Activities," World Development, Elsevier, vol. 38(1), pages 48-63, January.
    17. Yi Peng & Liyin Shen & Cong Tan & Dalu Tan & Hao Wang, 2013. "Critical determinant factors (CDFs) for developing concentrated rural settlement in post-disaster reconstruction: a China study," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 66(2), pages 355-373, March.
    18. Shi, Xiaoping & HEERINK, Nico & QU, Futian, 2011. "Does off-farm employment contribute to agriculture-based environmental pollution? New insights from a village-level analysis in Jiangxi Province, China," China Economic Review, Elsevier, vol. 22(4), pages 524-533.
    19. Lisa Pfeiffer & Alejandro López-Feldman & J. Edward Taylor, 2009. "Is off-farm income reforming the farm? Evidence from Mexico," Agricultural Economics, International Association of Agricultural Economists, vol. 40(2), pages 125-138, March.
    20. Pierre Gasselin & Michel Vaillant & Benjamin Bathfield, 2012. "The activity system. A position paper," Post-Print hal-00742998, HAL.
    21. Marco Stampini & Benjamin Davis, 2009. "Does nonagricultural labor relax farmers' credit constraints? Evidence from longitudinal data for Vietnam," Agricultural Economics, International Association of Agricultural Economists, vol. 40(2), pages 177-188, March.

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    Keywords

    Non-farm income; inequality; poverty; China;

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