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The effects of China's Sloping Land Conversion Program on agricultural households
Author(s) -
Liu Zhen,
Henningsen Arne
Publication year - 2016
Publication title -
agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.29
H-Index - 82
eISSN - 1574-0862
pISSN - 0169-5150
DOI - 10.1111/agec.12230
Subject(s) - nonfarm payrolls , economics , agricultural economics , agriculture , consumption (sociology) , agricultural productivity , production (economics) , agricultural land , china , payment , natural resource economics , microeconomics , geography , social science , archaeology , finance , sociology
In the late 1990s, China aimed to mitigate environmental degradation from agricultural production activities by introducing the world's largest “Payments for Environmental Servicesˮ program: the Sloping Land Conversion Program (SLCP). We develop a microeconomic Agricultural Household Model, which can model the production, consumption, and nonfarm labor supply decisions of agricultural households in rural China in a theoretically consistent fashion. Based on this theoretical model, we derive an empirical specification, which we econometrically estimate using the Hausman–Taylor method and a large longitudinal farm household data set. The empirical results significantly differ between regions, but are generally consistent with the results of our theoretical comparative static analysis, for example, that the SLCP significantly decreases agricultural production. While the SLCP only increases nonfarm labor supply and total consumption in some regions, these effects could not be observed in others. The recent reduction of the SLCP compensation payment rates generally had negligible effects on agricultural production and off‐farm work and only very small effects on household consumption.