Does fallow policy affect rural household income in poor areas? A quasi-experimental evidence from fallow pilot area in Northwest China

Abstract

The implementation of China’s fallow policy has attracted much attention in the recent years, while its impact on the rural household income in poor areas is rarely known. This study evaluates the impact of fallow policy on the total household income (THI) of farmers in poor areas of China, and further explores their mechanism and heterogeneity. We use a quasi-experimental design and a survey to gather research data from 48 pilot and non-pilot villages of Gansu Province, China, combining with the PSM technique and PSM-QR method to investigate this effect. The results showed that fallow policy has a positive effect on THI, and the finding is robust. Whereas, the effect is different among various income groups, which is characterized by “benefiting the rich but not benefiting the poor”, that is, the fallow policy aggravates income inequality in villages. Mechanism analysis illustrated that fallow policy significantly reduces crop income, but has no impact on livestock income and property income, and it improves THI by providing fallow compensation to increase transfer income, and promoting off-farm employment to increase off-farm income in the meantime. Finally, heterogeneous exist in the income effect in terms of policy characteristics such as participation level, compensation standard and stewardship pattern. This study generates important policy implications for the Chinese government to further improve fallow policy and rural households’ income in poor areas.