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

35

Endnotes

¹ The program was officially implemented in 2000. Pilot projects for the program got under way in 1999
in selected provinces. The Grain for Green program is also known as the Sloped Land Conversion
Program.

² Most close observers believe, however, that Grain for Green has been “quasi voluntary.” Although
households officially can choose whether or not to participate, some households with land fitting the
slope criterion reported being “strongly encouraged” to participate. In fact, Xu et al. (2005) found that
on 53ly percent of participating households in their sample believed that their participation was not
mandatory and only 30 percent had the autonomy to choose which plots to retire. If households are
coerced into an unattractive program, do not have the physical and human capital necessary to switch to
alternative income-generating activities and are not permitted to return the land to cultivation after the
program ends, it is possible such households could be trapped in poverty.

³ Both grain and cash compensations are provided for eight years if ecological forests are planted, for
five years for planting of economic forests, and for two years for planting of grasses State Forestry
Administration (2003) Master Plan for the Sloping Land Conversion Program.. To account for the
difference in regional average yields, annual grain compensation was set at 2,250 kilograms per hectare
in the Yangtze River basin and 1,500 kilograms per hectare in the Yellow River basin. The cash
component is 300 yuan per hectare of eligible land per year.

⁴ The study by Groom et al. (2006) used a household survey implemented in 2004 and collected 1999
preprogram data on a recall basis.

⁵ Ahearn et al. (2005) argue that the expected impact of government payments on off-farm labor
participation depends on whether the payment is decoupled (producers are not required to produce
specific commodities to receive a subsidy) or not. If it is a decoupled payment, it is like nonlabor
income; a traditional labor-leisure model would predict that an increase in nonlabor income would
unambiguously decrease off-farm labor. If, however, the payment is coupled to the commodity grown,
the compensation then is like an increase in wage, which would have an income and a substitution effect

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