Growth, inequality, and poverty in rural China: the role of public investments

In the past two decades, China has achieved world renown for reducing rural poverty. However, it is becoming harder to reduce poverty and inequality further in China, even though its economy continues to grow. This report compares the impact specific rural public investments can have on promoting growth and reducing poverty and inequality. Returns to these investments are calculated for the nation as a whole and for three economic zones in the west, central, and coastal regions of the country. Government expenditures that have the highest impact on poverty and growth include education, agricultural research and development, and rural infrastructure (roads, electricity, and telecommunications). Notably, spending on irrigation and anti-poverty loans had minimal impact. The report discusses the implications of these findings for setting future priorities for government investment. It also suggests avenues for future research and calls for a better understanding of how to improve the effectiveness of public resources. This report will be of interest to professionals involved in rural poverty reduction, rural development, agricultural growth, food security, and public investment policy.Poverty alleviation China., Rural conditions China., Public investments., Agriculture and state., Rural poor Government policy., Econometric models., Equality., Government spending policy.,

Growth and poverty in rural China: the role of public investments

Public investment, together with institutional and policy reforms, has contributed substantially to rapid economic growth in rural China since the late 1970s. This rapid growth has also led to dramatic reductions in rural poverty. In this study we use a simultaneous equations model and time-series (1978-97), cross-sectional (25 provinces) data to analyze the differential impact of different types of public investments on growth and poverty reduction in rural China. The results show that government expenditures on education have by far the largest impact on poverty reduction, and the second largest impact on production growth; it is a dominant “win-win” strategy. Government spending on agricultural research and extension has the largest impact on agricultural growth, and the third largest impact on poverty reduction. It is another win-win strategy. The next best investment is rural telecommunications, which gives the second largest impact on poverty reduction and the third largest impact on agricultural growth. The results also show that there are regional tradeoffs in achieving growth and poverty alleviation goals. If the government wishes to maximize its poverty reduction effects, then investments should be targeted to the western region. However, the sacrifice in growth by investing more in the western region is small. But, the government wishes to maximize the returns to growth in agricultural production, then it should definitely target the central region.Poverty China., Public investments China., Rural population.,

EMPLOYMENT, EMERGING LABOR MARKETS, AND THE ROLE OF EDUCATION IN RURAL CHINA

The overall goal of this paper is to contribute to the ongoing assessment of China's rural labor markets. To meet this goal, we have three specific objectives. First, we will provide an update of the trends in off-farm labor participation and wages of the sample households and examine how labor market outcomes have changed for those with different levels of education. Second, we will then seek to examine if education in different time periods the late 1980s, the early 1990s and the mid 1990s -- can be associated with increasing access to off-farm jobs. Finally, we will examine how returns to education have changed during the course of the reform era. In short, our hypotheses are that if labor markets are increasingly rewarding those with a.) better education job access; b.) easier entry; and c.) higher wages, such outcomes will count as evidence that labor markets are improving. Both the descriptive data and the multivariate analysis robustly support the findings that between the late 1980s and the mid-1990s, labor markets have improved in the sense that rural workers have been increasingly rewarded for their education.Labor and Human Capital,

LOCAL GOVERNANCE AND PUBLIC GOODS PROVISION

Since the early nineties, tens of thousands of villages have held elections of their leaders in rural China. Using a recent village survey, this paper empirically examines the impact of election on public goods provision to the rural community. We found that elected officials tend to tax less on constituents and provide them more with public services.Public Economics,

Local governance and public goods provision in rural China:

In developing countries, identifying the most effective community-level governance structure is a key issue and, increasingly, empirical evaluation of the effects of democratization on the provision of local public goods is needed. Since the early 1990s, tens of thousands of villages in rural China have held local-government elections, providing a good opportunity to investigate the effect of democratization on the level of public goods provision. Using a recent village survey conducted over a significant period of time, this paper compares governance by elected officials with that of appointed cadres and finds that elected officials tend to tax constituents less and provide them with higher levels of public service. Authors' Abstract.Governance., Public institutions., Democratization Economic aspects., Rural conditions China.,

LABOR MARKET LIBERALIZATION, EMPLOYMENT AND GENDER IN RURAL CHINA

The major objective of this paper is to discuss the development of rural labor markets in China during the past two decades and understand how it has affected women. Using household survey data that we collected in 2001, we examine the role of women in labor markets by examining employment and migration trends and changes in wages. According to the data of our nearly national representative sample, we find that there has been a sharp overall increase in off-farm participation, most of the increase has been driven by young migrants, and women, especially those in the youngest cohorts, have participated at rates equaling or surpassing those of their male counterparts. We also find that the wages of women have not been adversely affected by the emergence of liberalized labor markets and that when women, mostly middle-aged and older ones, are left in charge of farm work, the productivity of crop production does not fall.China, labor market liberalization, employment, wages, gender, Labor and Human Capital,

Migration, Money and Mother: The Effect of Migration on Children's Educational Performance in Rural China

Migration is widely known as one of the main ways of alleviating poverty in developing countries, including China. However, migration itself is not costless. In recent years, there is an emerging concern about the effect of migration on the educational achievement of the children of migrants in China since most of the young children of school age of the migrants are being left in the village when one or both of their parents move to the city to work. This paper examines the effect of the migration activities of the father and/or mother on the educational performance of elementary school students (First to Fifth grade). With a dataset that collected from a survey designed specifically to examine changes in school performance of children before and after their parents left the village to migrate to the city we use Difference-in-Difference and, propensity score matching approaches. Although the grades of the children from some migrants family are sometimes lower than those from non-migrants family (in the time period before and after migration), somewhat surprisingly, we find that there is no significant negative effect of migration itself on the childrens school performance. In fact, in some cases (e.g., after the father migrates), performance improves. Our paper also demonstrates and explains the interaction effects of migration from wealth and household composition.Labor and Human Capital,

THE EVOLUTION OF CHINA'S RURAL LABOR MARKETS DURING THE REFORMS

This paper contributes to the assessment of China's rural labor markets, while paying attention to whether these markets are developing in a manner conducive to the nations modernization. According to our household survey, we find that the rapid increase in off-farm employment has continued and accelerated during the late 1990s. Our analysis shows that migration has become the most prevalent off-farm activity; has become dominated by young and better educated workers; expanded most rapidly in areas that are relatively well-off; and begun to draw workers from portions of the population, such as women, that earlier had been excluded from participation.Labor and Human Capital,

Insuring Rural China's Health? An Empirical Analysis of China's New Cooperative Medical System

Although health is an important factor in economic development, millions of China's rural residents have no medical coverage. Nearly 10 percent of those that were sick in rural China consciously did not seek medical care, mostly because of financial constraints. More than 25% of rural residents are dissatisfied with their village's health system. In response to this deteriorating situation, a new cooperative medical system (NCMS) was initialized in rural China in 2003 by the government. However, after two years of trials, there has been no household-based, economic analysis of the program. This paper provides one of the first. Although where introduced, most rural residents voluntarily participate, there are many problems with the program. First, at least in its initial years, targeting has been poor; the program has been adopted in richer villages, even though there is a case that there are higher medical needs in poorer villages. Also, while the government subsidy pays part of the premium, more than 40% criticize the design of the program, including complaints about coverage, reimbursement rates and procedures. Based on our survey, the major concern is the extremely low reimbursement rates. Instead of up to 30% as promised, only 3% of total medical expenses of program participants were paid (6% for inpatient expenses). The expected payout of a participating farmer is actually negative; the farmer receives back less than what he/she puts in. There also is a gap in understanding of farmers and clinicians between the actual implementation of reimbursements and policy.Rural Health, Insurance, Targeting, Design Problems, China, Health Economics and Policy, I11, O15, O53,

Does Taking One Step Back Get You Two Steps Forward? Grade Retention and School Performance in Poor Areas in Rural China

Despite the rise in grade retention in poor areas in rural China recently, little work has been done to understand the impact of grade retention on the educational performance of students in these areas in rural China. This paper seeks to redress this shortcoming and examines the effect of grade retention on educational performance on 1649 students in 36 elementary schools in Shaanxi province. With a dataset that was collected from a survey designed specifically to capture school performance of students before and after they were retained, we use Differences-in-Differences, Propensity Score Matching and Differences-in-Differences Matching approaches to analyze the effect of grade retention on school performance. Although the descriptive analysis shows that grade retention helps to improve the scores of the students that were retained, somewhat surprisingly, the results from the multivariate analysis consistently show that there is no significant positive effect of grade retention on school performance of the students. In fact, in some cases (e.g., for the students who repeat grade 2), grade retention is shown to hurt school performance.