Background and research aims: 

The outstanding growth of China’s economy has also boosted average incomes of the rural population. Along with this income growth, poverty rates have steeply declined. However, recent evidence shows that improving economic opportunities could not be seized by all strata of the rural population in a similar way. Income inequality has increased over recent years. Whereas agriculture tends to have an equalising effect on household incomes, non-farm family businesses as well as off-farm wage earnings benefit only a fraction of rural households, leading to substantial inequalities (Benjamin et al. 2005). Emerging from a relatively egalitarian socialist model of land cultivation, the rural poor of today’s China are the less able, less educated, less healthy, and less socially connected. At the same time, ethnic minorities represent a disproportionate fraction of the rural poor (World Bank 2000).

While the massive modernisation processes taking place in rural China thus come with the risk of leaving many behind, they also provide a fascinating insight into the transformation of the world’s biggest agricultural economy. Among the major driving forces of this transformation are rising opportunity costs of agricultural labour due to the burgeoning urban labour demand, volatile prices of agricultural staples, technological change, and not least the gradually liberalising government policies.

The aim of group B is to shed light on several key issues that are likely to determine the prospects for the income-poor in rural China. Based on rigorous empirical analysis, we will look at various factors that influence access to both farm and non-farm income sources:

–          Agriculture is the traditional occupation of most rural dwellers. Falling crop prices in the 1990s have contributed to rural stagnation, as has a slowdown in productivity growth after the productivity leap of the Household Responsibility System (HRS) implementation. On the downside of this reform package, for example, is the increasing burden that highly fragmented land parcels have placed on individual farms (Tan et al 2006). While land allotments provide a social safety net for rural inhabitants, allocation procedures vary among regions. This in turn is a reflection of the competing interests current and potential land users and the government may have in land (Liu et al 1998). Furthermore, insecure property rights in land hamper the adjustment to changing factor price ratios and may lock in labour on farms (Carter and Yao 2002).

–          Given the increasing availability of non-farm income sources, access to land may no longer be the major determinant of rural incomes, however. Factors such as education, health, and the ability to send out migrants seem to increasingly make the difference between income strata of the population (Taylor et al. 2003; Wang et al. 2007). At the same time, there are signs that China stands out for a remarkable intergenerational mobility with regard to education and income. However, agriculture as the main family business has been shown to limit this mobility (Labar 2008). In general, the determinants of intergenerational mobility are still hardly understood.

With these problem areas in mind, we seek to analyse how rural reforms have or have not benefited the poor and what could be done to promote a more broadly based rural growth.

Methodology:  micro-econometric methods, panel data analysis

Sub-topics:

1.      Land fragmentation and agricultural productivity

2.      Income access of ethnic minorities in rural areas

3.      Variation in village-level implementation of agrarian reforms

4.      Health and nutrition as determinants of off-farm wages

5.      Intergenerational mobility of education and income

Researchers: Lili Jia, Kelly Labar,  Martin Petrick, Bente Wittmaack

References:

Benjamin, Dwayne; Brandt, Loren; Giles, John (2005): The Evolution of Income Inequality in Rural China. In: Economic Development and Cultural Change, 53, pp. 769–824.

Carter, Michael R.; Yao, Yang (2002): Local versus Global Separability in Agricultural Household Models: The Factor Price Equalization Effect on Land Transfer Rights. In: American Journal of Agricultural Economics, 84, pp. 702–715.

Labar, Kelly (2008): Decreasing Intergenerational Mobility in China. Manuscript.

Liu, Shouying; Carter, Michael R.; Yao, Yang (1998): Dimensions and Diversity of Property Rights in Rural China: Dilemmas on the Road to Further Reform. In: World Development, 26, pp. 1789–1806.

Tan, Shuhao; Heerink, Nico; Qu, Futian (2006): Land fragmentation and its driving forces in China. In: Land Use Policy, 23, pp. 272–285.

Taylor, J. Edward; Rozelle, Scott; Brauw, Alan de (2003): Migration and Incomes in Source Communities: A New Economics of Migration Perspective from China. In: Economic Development and Cultural Change, 52, pp. 75–101.

Wang, Xiaobing; Herzfeld, Thomas; Glauben, Thomas (2007): Labor allocation in transition: Evidence from Chinese rural households. In: China Economic Review, 18, pp. 287–308.

World Bank (2000): China - Overcoming Rural Poverty. Washington D.C.: World Bank.