Oxford Economic Papers Advance Access published online on July 8, 2009
Oxford Economic Papers, doi:10.1093/oep/gpp021
© Oxford University Press 2009 All rights reserved
Relaxing rural constraints: a win-win policy for poverty and environment in China?



*Department of Economics, School of Oriental and African Studies, Russell Square, London, WC1H 0XG; e-mail: bg3{at}soas.ac.uk
University of California Berkeley, Department of Agricultural and Natural Resource Economics
Department of Land Economy, University of Cambridge
¶Department of Economics and Faculty of Law, University College London
College of Environmental Sciences and Engineering, Peking University
JEL classifications: C33, J22, O22
| Abstract |
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The link between institutional and market failures, rural poverty and environmental degradation suggests a win-win policy intervention: relax local constraints and achieve poverty alleviation and environmental goals. We evaluate the ability of the Sloping Lands Conversion Programme (SLCP) in China, a reforestation payments programme, to relax constraints on off-farm labour markets and achieve these dual objectives. Our model of the agricultural household allows for heterogeneous exposure to constraints and impacts. The model predicts that the impact of the SLCP on off-farm labour supply will be larger for constrained households if constraints are relaxed. To test the predictions we combine a switching regression with difference in differences. Applied to panel data, this technique allows identification of the heterogeneous impact of the SLCP on constrained and unconstrained households. Our results identify some support for the win-win hypothesis in the case of the SLCP, and how the targeting of the programme can be improved.