A Socioeconomic Assessment of the Sloping Land Conversion Program in China – University of Copenhagen

A Socioeconomic Assessment of the Sloping Land Conversion Program in China

PhD defence

Zhen Liu

Abstract

This thesis mainly focuses on the socioeconomic impact of the largest Ecological Recovery Program ― the Sloping Land Conversion Program (SLCP), also called Grain for Green Program (GFG) in China. The central government initiated this program in 1999 and it was launched nationwide in 2002 with the aim to combat deforestation, ecological degradation, over cultivation of sloping land and soil erosion. However, we also believe it brings changes to the rural economic structure and household livelihood strategy. Applying and developing some empirical and theoretical methods with a large amount of household survey data, this study aims to improve our understanding of the treatment effect of the SLCP on farm households, which is split into three parts.

The first paper ― The Sloping Land Conversion Program in China: Effects on Rural Households’ Livelihood Diversification, evaluates the effects of the implementation of the Sloping Land Conversion Program (SLCP) on livelihood diversification, which is thought to be the solution to poverty and environmental dilemmas. Our results show that SLCP works as a valid external policy intervention on rural livelihood diversification. In addition, the findings suggest that there exist heterogeneous effects of SLCP implementation on livelihood diversification across different rural income groups. The lower income group was more affected by the program in terms of income diversification.

The Second paper ― The Effects of Sloping Land Conversion Program on Agricultural Households, analyzes whether the program influences farm household behaviour in the form of production, consumption and labor supply. In doing so, we first develop a microeconomic Agricultural Household Model (AHM), which can model the production, consumption, and labor supply decisions of farm households in rural China in a theoretically consistent fashion. Based on this theoretical model, we derive an empirical specification for econometrically estimating the effects of the SLCP and other exogenous factors. Using a large longitudinal farm household survey data set, we estimate the empirical model with the Hausman-Taylor Estimator method. The key results regarding the households’ responses to the program nicely coincide with the results of our theoretical comparative static analysis, i.e. the SLCP decreases agricultural production and increases non-farm labor supply and consumption. In addition, on average, reduction of compensation payment rate lowers the treatment effect of the SLCP on participating households from both River basins.

Lastly, the third paper, ― The effect of the Sloping Land Conversion Program on farm household productivity in rural China, investigates the treatment effect (the causal effect) of the Sloping Land Conversion Program (SLCP) on farm household productivity. Using the same survey data set as the above two papers, I apply the nonparametric Malmquist index method to estimate the change in farm household productivity. In connection with evaluating the treatment effects, propensity score matching, which can give a randomized evaluation, is employed in a second stage. The main results show that the SLCP significantly improved the productivity of participants in the first funding period which are mostly from efficiency improvements, while the effects decreased in the second round except the positive impact in 2007. Moreover, it is found that there are heterogeneous effects on farm household productivity between the south and north, as well as poor and rich region.

In sum, the findings from this thesis highlight that SLCP has significant effects on the farm household in different ways, most of which support the policy intention of central government according to our own understanding, whereas the effects differ depending on the group, region and period. This research provides a detailed understanding of the treatment effects of the SLCP and thus, contributes to the on-going political debate about the revision of the SLCP and also to the scientific knowledge about the effect evaluation of programs for set-aside land in other countries.

Supervisor

Mette Asmild, Professor, Department of Food and Resource Economics, University of Copenhagen

Assessment committee

John Rand (chair), Professor,  ECON

Carl-Johan Lagerkvist, Professor, Department of Economics,  Swedish University of Agricultural Sciences

Thomas Herzfeld, Professor, IAMO, Leibniz Institute of Agricultural Development in Transition Economics