Zhang, Shiqiu, Ben Groom, Pauline Grosjean, and Timothy Swanson . 2010. “Relaxing Rural Constraints: A win-win policy for environment and poverty in China?.” Oxford Economic Papers 62:1: 132-156.
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.