Are beijing's equalization policies reaching the poor? an analysis of direct subsidies under the "three rurals" (sannong)

China Journal

Volumn , Issue 67, 2012, Pages 23-46

  Lin, Wanlong ^a   Wong, Christine ^b  

^a Agricultural University   (China)

^b UNIVERSITY OF OXFORD   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

LOW INCOME POPULATION; RURAL AREA; SUBSIDY SYSTEM;

BEIJING [CHINA]; CHINA;

EID: 84863403710     PISSN: 13249347     EISSN: None     Source Type: Journal    
DOI: 10.1086/665738     Document Type: Article

References (62)

1. The three rurals are agriculture (nongye), rural villages (nongcun) and farmers (nongmin).
2. 2004 World Development Report: Making Services Work for Poor People (Washington: World Bank, 2003).
3. Wu Guobao, Guan Bing and Tan Qingxiang, Assessment of the Effectiveness and Poverty Impact of the State Grain Production Policies Implemented in Poverty-stricken Areas, Carried Out by the Rural Poverty Monitoring Report of China, Department of Rural Society and Economy of the National Bureau of Statistics (Beijing: Zhongguo Tongji Chubanshe, 2008).
4. World Bank, China: National Development and Sub-national Finance: A Review of Provincial Expenditures, Report No. 22951-CHA (Washington, 2002) concluded that the intergovernmental fiscal system, under which local governments had inadequate resources to meet their expenditure responsibilities, was a key obstacle to implementation of national policies during the 1990s. World Bank, China: Public Services for Building the New Socialist Countryside, Report No. 40221-CN (Washington, 2007), and Achim Fock and Christine Wong, "Financing Rural Development for a Harmonious Society in China: Recent Reforms in Public Finance and Their Prospects", World Bank Policy Research Working Paper 4693, August 2008, showed that this remained true through the mid-2000s.
5. John Rosine and Peter Helmberger, "A Neoclassical Analysis of the US Farm Sector, 1948-1970", American Journal of Agricultural Economics, Vol. 56, No. 4 (November 1974), pp. 717-729.
6. Barrett E. Kirwan, "The Incidence of US Agricultural Subsidies on Farmland Rental Rates", Journal of Political Economy, Vol. 117, No. 1 (February 2009), pp. 138-64.
7. Barry K. Goodwin, Ashok K. Mishra and François N. Ortalo-Magné, "What's Wrong with Our Models of Agricultural Land Values?", American Journal of Agricultural Economics, Vol. 85, No. 3 (August 2003), pp. 744-52
8. Barry K. Goodwin, Ashok K. Mishra and François N. Ortalo-Magné, "The Buck Stops Where? The Distribution of Agricultural Subsidies", NBER Working Paper, No. 16693 (January 2011)
9. Myles Patton, Philip Kostov, Seamus McErlean and Joan Moss, "Assessing the Influence of Direct Payments on the Rental Value of Agricultural Land", Food Policy, Vol. 33, No. 5 (October 2008), pp. 397-405.
10. Julian M. Alston, "Benefits and Beneficiaries from US Farm Subsidies", American Enterprise Institute Agricultural Policy Series: The 2007 Farm Bill and Beyond (2007).
11. The data used in this research include the 2002-07 confidential farm-level Agricultural Resource Management Survey data, the 1998-2007 county-level government-program payment data from the United States Department of Agriculture, the 1988-2007 regional economic information systems and the county-level farmland data from the 1997 and 2002 Agricultural Censuses.
12. Feng Qiu, Jean-Philippe Gervais and Barry K. Goodwin, "An Empirical Investigation of the Impacts of Government Subsidies on Farmland Rental Rates", paper prepared for the 2010 Agricultural and Applied Economics Association annual meeting, Denver, Colorado, 25-27 July 2010.
13. 2004 World Development Report: Making Services Work for Poor People.
14. Anand P. Gupta, "Who Benefits from Central Government Expenditures?", Economic and Political Weekly, Vol. 12, Nos. 6/8 (February 1977), p. 283.
15. David H. Peters, Abdo S. Yazbek, Rashmi Sharma, G. N. V. Ramana, Lant H. Pritchett and Adam Wagstaff, Better Health Systems for India's Poor: Findings, Analysis and Options (Washington: World Bank, 2002), p. 4.
16. Shantayanan Devarajan and Shekhar Shah, "Making Services Work for India's Poor", Economic and Political Weekly, Vol. 39, No. 9 (28 February-5 March 2004), p. 910.
17. Raghbendra Jha, Sambit Bhattacharyya, Raghav Gaiha and Shylashri Shankar, "'Capture' of Anti-poverty Programs: An Analysis of the National Rural Employment Guarantee Program in India", Journal of Asian Economics, Vol. 20, No. 4 (September 2009), pp. 456-464.
18. Albert Park and Sangui Wang, "Community-based Development and Poverty Alleviation: An Evaluation of China's Poor Village Investment Program", Journal of Public Economics, Vol. 94, Nos. 9/10 (October 2010), pp. 790-799.
19. Christine Wong, "Fiscal Reform: Paying for the Harmonious Society", China Economic Quarterly, Vol. 14, No. 2 (June 2010), pp. 22-27.
20. Graeme Smith, "Political Machinations in a Rural County", The China Journal, No. 62 (July 2009), pp. 29-59.
21. Lior Rosenberg, "Between Modeling, Routinization and Bureaucracy: Model Villages in China's Village Reconstruction Program", unpublished paper, Contemporary China Centre, Department of Political and Social Change, The Australian National University.
22. Chinese law requires that children receive nine years of schooling, that is, through junior middle school.
23. These figures were reported in Ministry of Finance, "Report on the Implementation of the Central and Local Budgets for 2010 and on the Draft Central and Local Budgets for 2011", Fourth Session of the Eleventh National People's Congress, 5 March 2011, at http://www.gov.cn/english/official/2011-03/17/content_1826516.htm, accessed 6 October 2011.
24. This estimate is based on extrapolating from the 31 per cent share of total subsidies accounted for by the programs under cost-sharing arrangements. If the cost share borne by local governments was 50 per cent of the five programs, then local governments would have contributed another 72 billion yuan.
25. In accordance with Chinese statistical standards, average per capita net income of farmers refers to net income derived from production activities, which equals gross income (including part of the government subsidies, as in note 2 of Table 3, minus productionoriented expenditures). Therefore, subsidies to farm households in the form of reduced, exempted or partially reimbursed consumption expenditures (primarily expenditures for public services and daily-life facilities) statistically are not included in the average per capita net income of farmers; however, such subsidies did indeed increase the actual income levels of farm households.
26. These are the 592 "Key Development Counties" that are the main recipients of assistance under the national poverty-reduction program.
27. State Council Decision on Further Strengthening Rural Education Work, 20 September 2003, at http://www.gov.cn/zwgk/2005-08/13/content_22263.htm, accessed 5 October 2011; author interview at the Ministry of Finance, April 2005.
28. Chen Zhili speech at a meeting on the reform of the funding mechanism for rural compulsory education, "Step-by-Step Elimination of Fees and Increasing Funding" (abstract), 27 December 2005, at http://edu.people.com.cn/GB/3976821.html, accessed 24 February 2011.
29. The five levels are central government, province, municipality, county and township.
30. Christine Wong, "Rebuilding Government for the 21st Century: Can China Incrementally Reform the Public Sector?", The China Quarterly, No. 200 (December 2009), pp. 929-952.
31. World Bank, China: National Development and Sub-national Finance
32. Christine Wong, "Assessing the Fiscal Power of the Chinese State: Assessing the Central Government's Capacity to Implement National Policies"
33. Keun Lee, Joon-Han Kim and Wing Thye Woo (eds), Power and Sustainability of the Chinese State (London: Routledge, 2009), pp. 100-116
34. Christine Wong, "Rebuilding Government for the 21st Century"
35. Christine Wong, "Can the Retreat from Equality Be Reversed? An Assessment of Redistributive Fiscal Policies from Deng Xiaoping to Wen Jiabao", In Vivienne Shue and Christine Wong (eds), Paying for Progress in China (London: Routledge, 2007), pp. 12-28.
36. World Bank, China: Deepening Public Service Unit Reform to Improve Service Delivery, Report No. 32341-CHA (Washington, 2005).
37. Li Ping (ed.), Zhongguo zhengfujian caizheng guanxi tujie (China: Intergovernmental Fiscal Relations) (Beijing: Zhongguo Caizheng Jingji Chubanshe, 2006)
38. Christine Wong, "Rebuilding Government for the 21st Century"
39. Christine Wong, "Assessing the Fiscal Power of the Chinese State"
40. Christine Wong, "Can the Retreat from Equality Be Reversed?".
41. Li Ping (ed.), Zhongguo zhengfujian caizheng guanxi tujie, for detailed explanations of the central transfers.
42. Li Ping (ed.), Zhongguo zhengfujian caizheng guanxi tujie, Tables 2-9.
43. Ranked first was Tibet, due to many extraordinary expenditures unrelated to its own fiscal capacity or needs.
44. In 2009, farmers' average per capita net income in Shandong was 86 per cent and 49 per cent that of the eastern region and of Shanghai respectively.
45. This refers to the total funding divided by the number of enrolled farmers.
46. World Bank, China: Public Services for Building the New Socialist Countryside; Christine Wong, "Assessing the Fiscal Power of the Chinese State".
47. "Hubei Jianli: huinong zijin zaiyixie xiangzhen bei maoling" (Some Subsidies are Fraudulently Claimed in Some Townships and Villages in Jianli County of Hubei Province), Zhongguo qingnianbao (China Youth Daily), 5 May 2010, http://zqb.cyol.com/content/2010-05/05/content_3214936.htm, accessed 9 October 2011.
48. "Xi'an Lintong gebie cunganbu dang dibaohu pianqu dibaojin" (A Few Village Cadres in Lintong County of Xi'an Fraudulently Claim Minimum Living Allowances), Tengxunwang (Tengxun News), 3 April 2006, http://news.qq.com/a/20060403/000909.htm, accessed 9 October 2011.
49. We adopt dummy variables to control for the effect of non-subsidies.
50. There were 1,789 households which did not report complete information on the specific variables in the empirical models in Table 7.
51. Of all 8,455 households, only 2 reported zero subsidies.
52. Most of our subsidies are either central or provincial. It is therefore not necessary to control for fiscal capacity at the county level.
53. Of course, poverty is multidimensional and income is not its only measure
54. Sabina Alkire and James Foster, "Counting and Multidimensional Poverty Measurement", Journal of Public Economics, Vol. 95, Nos. 7/8 (August 2011), pp. 476-87
55. There are a variety of reasons that those who have amassed huge debts are actually "poor", even if they have relatively high incomes, and such families are most probably invisible to the official poverty relief efforts, so "income" is not a precise proxy to measure poverty. Furthermore, poverty may be exacerbated by the birth control policy-families with illegal children either never register them or pay high fines. These children become "hei hukou" and are not necessarily included in poverty statistics.
56. Susan Greenhalgh, "Planned Births, Unplanned Persons: 'Population' in the Making of Chinese Modernity", American Ethnologist, Vol. 30, No. 2 (May 2003), pp. 196-215.
57. Some minority groups are, on average, relatively socially advantaged, while others, on average, are extremely disadvantaged. Thus, measuring social disadvantage by using minority membership as a whole probably disguises the extent of disadvantage among the particularly disadvantaged groups (such as Uyghurs).
58. Xiaowei Zang, "Uyghur-Han Earnings Differentials in Ürümchi", The China Journal, No. 65 [January 2011], pp. 141-155
59. Regions with large non-Han Chinese populations are major beneficiaries and enjoy a disproportionately large share of the subsidies. The Xinjiang Uygur Autonomous Region is populated by Uyghurs who are particularly disadvantaged. However, all our sample provinces have small populations of ethnic minorities.
60. In line with the survey definitions, "income received from the government" includes not only fiscal subsidies for farmers but also allowances received by township and village cadres and veterans or martyrs. The latter two are not the focus of this article. Because the survey data do not differentiate information about the different types of income, we use two dummy variables, "whether the farm household includes township and village cadres" and "whether the farm household includes veterans or martyrs", to control for the effects of these two factors. The use of three other control variables in the regression is intended to control the possible effect of gender and age of the household head and his/her employment situation on the subsidy acquisition of a family.
61. Table 8 presents a number of interesting issues related to rural China. For example, the average age of the head of household is about 50. If we check the data for 2003, 2007 and 2009, we find that the situation remains quite similar. It seems that "hollowing" is a basic fact in rural China.
62. Poverty Reduction Office, "Evaluation Report on the Implementation Results of the 'China Rural Poverty Reduction and Development Outline (2001-2010)'", unpublished internal report (Beijing: State Council, 2010).