Economic growth, the nature of growth and poverty reduction in rural China

Abstract

This paper examines some of the major driving forces of poverty reduction in China. Based on time series and cross-sectional provincial data, the determinants of rural poverty incidence are estimated. The results show that economic growth is an essential and necessary condition for nationwide poverty reduction. It is not, however, a sufficient condition. While economic growth played a dominant role in reducing poverty through the mid-1990s, its impact has diminished since that time. Beyond general economic growth, growth in specific sectors of the economy is also found to be effective in reducing poverty. The finding of our paper is consistent with the idea that poverty reduction in the future will need to be adjusted with more emphasis being given on direct targeting through helping the poor to increase their human capital and incomes.