The Dynamic Impact of Agricultural Fiscal Expenditures and Gross Agricultural Output on Poverty Reduction: A VAR Model Analysis

Guanglu Zeng,Sanxi Li,Chenggang Zhang,Hailin Sun

doi:10.3390/su13115766

Abstract

China was the first developing country to achieve the poverty eradication target of the 2030 Agenda for Sustainable Development Goals (SDG) 10 years ahead of schedule. Its past approach has been, mainly, to allocate more fiscal spending to rural areas, while strengthening accountability for poverty alleviation. However, some literature suggests that poor rural areas still lack the endogenous dynamics for sustainable growth. Using a vector autoregression (VAR) model, based on data from 1990 to 2019, we find that fiscal spending plays a much more significant role in reducing the poverty ratio than agricultural development. When poverty alleviation is treated as an administrative task, each poor village must complete the spending of top-down poverty alleviation funds within a time frame that is usually shorter than that required for successful specialty agriculture. As a result, the greater the pressure of poverty eradication and the more funds allocated, the more poverty alleviation projects become an anchor for accountability, and the more local governments’ consideration of industry cycles and input–output analysis give way to formalism, homogeneity, and even complicity. We suggest using the leverage of fiscal funds to direct more resources to productive uses, thus guiding future rural revitalization in a more sustainable direction.

Highlights

Accepted: 9 May 2021According to the World Bank, China has lifted more than 850 million out of poverty since its reforms began in 1978, contributing over 70% to global poverty reduction [1].China was the first developing country to reach all the Millennium Development Goals (MDG) by 2015 and achieve the poverty eradication target set out in the 2030 Agenda for Sustainable Development Goals (SDG) 10 years ahead of schedule [2]
There is a certain lag in the role of agricultural fiscal spending and agricultural output on the effectiveness of rural poverty reduction, so the vector autoregression (VAR) model can be used to reveal the dynamic relationship between these three variables
The constructed VAR model is stable, and the lag order is consistent with the empirical experiences. This suggests that China’s poverty eradication efforts over the past 30 years have not seen a major shift in mechanism or intensity, but have on the whole been steady, with intensity and results commensurate with each other, and even when it has reached the most difficult populations, it has still achieved stable poverty reduction outcomes through administrative accountability and precision poverty alleviation; The Granger causality test finds that agricultural fiscal policy at all levels and agricultural development have strong contributions to the effectiveness of rural poverty alleviation

Summary

Introduction

Accepted: 9 May 2021According to the World Bank, China has lifted more than 850 million out of poverty since its reforms began in 1978, contributing over 70% to global poverty reduction [1].China was the first developing country to reach all the Millennium Development Goals (MDG) by 2015 and achieve the poverty eradication target set out in the 2030 Agenda for Sustainable Development Goals (SDG) 10 years ahead of schedule [2]. By 2025, China’s agricultural and rural modernization is expected to make substantial progress, with a more solid agricultural foundation, a narrowing of the income gap between urban and rural residents, and the basic modernization of agriculture where conditions permit [2]. It is, necessary to sort out the factors behind China’s past triumph over poverty and analyze the dynamic impact of these variables on the effectiveness of poverty reduction at a macro level, in order to better implement future rural revitalization.

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