Estimating The Effect Of The Sloping Land Conversion Program On The Rural Households’ Income,consumption And Their Inequalities In China

Chinese Government has launched the Sloping Land Conversion Program(the SLCP)since 1999,which has lasted for 21 years.Ecosystem restoration and improving rural households’ livelihood are two key objectives of the SLCP which is the largest governmental financial inputs and the most rural households enrolled in of the world.Rural households are the key stakeholder of the SLCP,and the central government provides subsidies to rural households who converses their sloping land to forestland.Does the implementation of the SLCP have an impact on the rural households’ livelihood,what impact has it had,and what is the impact mechanism? Is the policy benefit of the SLCP equally shared by rural households? They are urgent questions to be answerd.Through 8 consecutive tracking surveys,we have established a unique panel database of952 rural households in 216 villages,15 counties of 6 provinces which cover north,east,south,southwest and northwest China from 1995 to 2016.By using this database and the recursive equations model,on the basis of estimating the impact of the SLCP on the rural households’ income and consumption,the impact of the SLCP on the income and consumption inequalities of rural households are measured and decomposed.The empirical results of this study indicate that: 1)The SLCP has improved sample rural households’ income in general.The income from abandoned farming is lower than the subsidy of the SLCP,which directly increases rural households’ land-based income by 3.73%.due to the implementation of SLCP,the farmland area of sample rural households has decreased by 25.06%,the forestland area has increased by 57.88%,the land-based production expenditure has decreased by 11.41%,the off-farm employment has increased by 9.99%,the land-based labor input and the intensive management of cultivation have not changed significantly.Under the influence of changes in the allocation of production factors,the indirect impact of the SLCP increased the land-based income and off-farm income by 8.57% and 7.85%,respectively.2)the income expectation of rural households is improved by the SLCP.The SLCP has increased rural households’ 4.66%,2.05% and 2.98% of land-based permanent income,off-farm permanent income and off-farm transitory income,respectively,but the substitution of the SLCP subsidy for the income from abandoned farming has decreased the households’ land-based transitory income by 14.11%.3)the SLCP has promoted the consumption growth of rural households,but it has limited effect on improving the consumption structure of rural households.On the one hand,the SLCP has increased sample rural households’ total consumption,food consumption and other consumption of sample rural households by 1.71%,1.91% and 1.69%.The land-based permanent income growth caused by the SLCP is the main cause of the consumption growth of sample rural households,but the off-farm permanent income growth caused by the SLCP promotes the consumption growth limited.The impact of the SLCP on the consumption expenditure of sample rural households is not significant except under the income impact path.On the other hand,the consumption structure of sample rural households has not been significantly improved due to the implementation of the SLCP.The impacts of the SLCP are focused on basic demand consumption rather than high-level demand consumption.However,the SLCP significantly promoted the transformation from self-produced grain consumption to purchasing grain consumption of sample rural households,but had no similar impact on the consumption of non-staple food.4)the SLCP has increased the income and consumption inequalities of rural households,The consumption smoothing mechanism and the law of marginal propensity to consume decreasing make the impact of the SLCP on consumption inequality is lower than and lags behind the impact on income inequality,and both of them rise first and then fall,and the impact of the SLCP on the income inequality is transmitted to the consumption inequality partially.5)The impacts of the SLCP on sample households between the Yangtze River Basin and the Yellow River Basin are different.Compared with the Yangtze River Basin,the impact of the SLCP on the sample rural households’ income and consumption in the Yellow River Basin is bigger.In the Yangtze River Basin,the SLCP has contributed to narrow rural households’ income inequality and has almost no impact on the consumption inequality of the sample rural households,but has widen the income and consumption inequalities of the sample rural households in the Yellow River Basin.6)Compared with absolute income hypothesis,relative income hypothesis and general permanent income hypothesis,permanent income hypothesis based on psychological account theory is more suitable to explain the consumption behavior of Chinese farmers.The possible marginal academic contributions of this study are these: 1)Refine and improve the theoretical path of the PES which promote farmers to achieve sustainable alternative livelihoods.Constructs a new research framework,and exist research and analysis framework of "SLCP-production factors – income and its inequality" is further extended to consumption and its inequality.2)Pay more attention to measuring the intermediary effect,defining the direct and indirect impacts of the SLCP on farmers’ income based on the effectiveness of subsidies and livelihood substitution,which is helpful to better understand the causes of the SLCP.The impact of major transformation such as social and economic environment and market conditions of farmers is fully considered.3)Integrating the psychological account theory into the permanent income hypothesis and optimizing the empirical analysis method according to the improved theory can better explain and quantify the impact of the SLCP on farmers’ consumption behavior.This attempt reflects the significant theoretical and methodological innovation.4)According to the characteristics of the SLCP,we discuss the impact of the project on rural households’ different levels of consumption and different sources of food consumption,and deepens the academic research on the impact of the Payment for Ecosystem Services(PES)on rural households’ consumption.In view of the conclusions of this study,governmental attentions should be focused on the impact of the project on the income,consumption and their inequalities of rural households.The subsidy and relevant supporting policies of the SLCP should be carefully adjusted;On the basis of considering regional impact differences,the productive income of the SLCP land should be improved in various ways;the training,guidance and supportting for farmers should be strengthened,so as to promote ecological restoration,livelihood improvement and development sharing.