Conservation Payments, Liquidity Constraints and Off-Farm Labor: Impact of the Grain for Green Program on Rural Households in China

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The positive impact of conservation payments on off-farm labor in China contrasts with
findings in the U.S., where studies have typically found that government payments to farmers decrease
off-farm labor participation. Although we could not directly determine the reasons why this is so, we did
observe an opposing effect, the sensitivity of the Grain for Green program impact to the level of the
household’s physical and human capital indicates that there may be more impediments to participating in
off-farm labor in rural China than there are in the U.S. Therefore, in terms of policy impact for China, if
policymakers want to achieve a win-win outcome from the Grain for Green program by meeting both
environmental and development goals, they may need to provide additional support to vulnerable
populations through job training programs or other means.

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