The Government’s Goal of Poverty Alleviation and the Deviation of Peasants’ Behavior Choice: Theory and Empirical Evidence from Industrial Poverty Alleviation Projects

Abstract

Under the strong constraint of the goal of eliminating poverty by 2020, the results induced by the acceleration of the government’s poverty alleviation policy may not be consistent with the original intention of poverty alleviation policy formulation. We incorporate the government intervention into the framework of peasants’ rational choice in industrial poverty alleviation projects. Our purpose is to analyze the reasons for the deviation between the government’s goal of poverty alleviation and peasants’ behavior choice in industrial poverty alleviation projects. Our empirical evidence suggests that: (1) It is conducive to improve peasants’ willingness and intensity of participation when the crop selection uses the inner marginal land. (2) Because of the difference in the endowment of peasants, the government’s compulsory in increasing the project participation rate will expose poor households to greater income risks, which will result in a bigger income gap. Poor households tend to choose the traditional operation with low risk and low expected income because of their low ability to resist risks. (3) Finally, the government’s compulsory intervention reduces peasants’ sensitivity to changes in price of the land rent and the labor market. Our main conclusions are: (1) Poverty alleviation policies should expect the behavior selection mechanism of poor households. (2) Government intervention in poverty alleviation activities faces a balance between reducing transaction costs and the loss of poverty alleviation efficiency. That is, if the intervention of local governments can be restrained in order to reduce the transaction cost of economic activities, it may be Pareto improvement of the efficiency of poverty alleviation policies. Compared with the existing research, the marginal contributions of this paper are as follows: (1) We discuss the boundary of government intervention in industrial poverty alleviation policies. (2) We clarify the impact mechanism of government intervention on peasants’ withdrawal behavior in industrial poverty alleviation projects. (3) It infers the cost of government intervention in the participation rate of industrial poverty alleviation projects. The government’s compulsory intervention may reduce peasants’ sensitivity to changes in factor compensation.