apr workshop 2010-ss cooperation agricultural development and poverty reduction china-wang sangui
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Agricultural Development and Poverty Reduction in
ChinaWang Sangui
Renmin University of China
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Poverty is largely a rural phenomenon in China
Rural and urban poverty in China
Poverty headcount rate at $1/day income
1990 1992 1996 1998 2000 2004
National 23.1 21.6 10.6 7.9 8.8 6.9
Rural 31 30 14.9 11.4 13.7 9.5
Urban 0.9 0 0.2 0 0.3 0.2
Poverty headcount rate at $1/day consumption
National 32.9 30.2 17.4 17.8 16.1 13.1
Rural 44.4 41.4 24.8 26.2 25 17.9
Urban 1 0.8 0.4 1 0.5 0.3
Source: World Bank estimates based on official household survey data available only until 2004.
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Trend of rural poverty reduction in China According to NBS estimation
Rural poor population decreased from 250 million in 1978 to 14.78 million in 2007
A total reduction of 235 million poor people, with an annual decreasing rate of 9.3%
Poverty incidence decreased from 30.7% to 1.6%
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Alternative estimations also show dramatic reduction in rural poverty over the past 30 year
WB $1/day or $1.25/day consumption poverty decreased by more than 500 million , and contributed greatly to the fulfillment of MDGs
But the reduction was more uneven over the period
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Ravallion and Chen official line(income) Ravallion and Chen high line(income)
Yao official line(income) Yao $1/day(income)
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Economic growth and poverty reduction
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GDP growthChange of poverty incidence
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Elasticity of poverty reduction to growth is 0.52
Ravallion and Chen(2007) estimated a much large elasticity of poverty reduction to growth (around 3)
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Agricultural growth has much higher impact on poverty reduction
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Agri. growthChange of poverty incidence
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Elasticity of poverty reduction to agricultural growth is 1.13
the elasticity of poverty reduction to agricultural growth Ravallion and Chen (2007) estimated is 8
The impact of agricultural growth on poverty reduction is at least twice as big as that of overall GDP growth
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Why is China’s agricultural growth pro-poor? China has maintained long-term agricultural
growth (5-6% annual growth rate) Growth is based on a rather equal distribution
of assets and income when the reform started◦ Land was equally distributed to households on a per
capita basis◦ Gini index of per capita income was only 0.21 in
1978 (NBS, 2000)◦ Thus, the poor can equally benefit from growth
process when inequality was low
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The poor depends more on agriculture for their livelihood◦ Net income (per capita) from agriculture in 2006
accounts for 54.5% for poor households 42.4% for all rural households 32.8% for the richest 20% rural households
At the household level, agricultural growth has strong positive externality, e.g. agricultural growth can lead to the development of non-agricultural activities
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Maintain strong agricultural growth through institutional reform, investment in both physical and human capitals, as well as productivity increase◦ Adoption of HRS solved the incentive problem,◦ Market and price reforms provided new
opportunities for rural households and the base for effective resource allocation
◦ The improvement of agricultural terms of trade directly benefited all rural household in early reform period
◦ Institutional reform along accounted for 47% of agricultural growth during 1979-1985 (Lin, 1992)
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◦ Human and physical capital investments occurred long before the reform Primary school enrollment rate
20% in 1949 96% in 1978 99.5% in 2007
Percentage of primary school graduates that went to middle school 32% in 1962 86% in 1978 99.9% in 2007
Percentage of middle school graduates that went to high school 40.6% in 1990 79.3% in 2007
Effectively irrigated land areas 20 million ha. In 1952 44.7 million ha. In 1978 56.5 million ha. In 2007
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Time periods Agricultural Growth rate
Contribution of
technology change
Contribution of technology +efficiency
improvement
1985-1990 4.53 17.97 33.99
1991-1995 7.48 16.43 27.10
1995-2000 6.08 29.37 36.82
2000-2005 5.24 41.04 50.49
Contribution of technology change to agricultural growth ( % )
source : calculated from Zhao and Yuan (2008)
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China has invested over RMB 300 billion for rural poverty reduction over the past 25 years◦ Central government contributed two third of the
investment and local governments contributed one third
◦ Majority of the investment went to agriculture and small scale infrastructure in poor areas
Targeted poverty intervention
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Agriculture 47%
Infrastructure20%
Manufacturing14%
Transportation6%
Service5%
Others9%
Structure of poverty reduction investment (1998-2001)
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Poverty reduction investment has contributed to both agricultural growth and poverty reduction in poor areas◦ Agricultural growth rate in poor counties was 7.5%
during 1994-2000, higher than the national average (7%)
◦ Annual growth rate of grain production in poor counties was 1.9%, much higher than the national average (0.6%)
◦ Net income per capita grow 12.8% annually in poor counties, two percent point higher than the national average
◦ Income growth was also higher in targeted poor villages in recent years
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Net income Wage inceome Family business income
Asset income Transfer0
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Per capita income growth (%)
NationalPoor cpuntyPoor village
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Empirical analysis shows that household income and consumption in the officially designated poor counties/villages grew significantly faster than in other counties/villages◦ 1.1% faster in per capita consumption (Ravallion and Jalan
1999 )◦ 2.2% faster ( 1986-1991 ) and 0.9% faster ( 1992-
1995 ) in per capita income, (Park, Wang and Wu 2002)◦ Income and consumption growths in poor villages receiving
poverty investment was 6-9 percent higher than poor villages without investment in 2001-2004 (Park and Wang 2010)
◦ The rate of return of poverty investments was estimated to be over 10%
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Agricultural growth is the main driving force to China’s dramatic poverty reduction
Agriculture is pro-poor because of:◦ Equitable land distribution ◦ Low income inequality when the growth began ◦ The poor depend more on agriculture for their livelihood
China has sustained long-term agricultural growth through◦ Institutional and policy reforms to provide the right incentives◦ Investment in physical and human capital ◦ Investment in agricultural R&D to increase agricultural
productivity◦ Targeted investment in agriculture and infrastructure in poor
areas
Conclusion remarks