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

36

that, combined, would have an ambiguous effect on labor.

⁶ For an excellent overview of the Grain for Green program, see Xu et al. (2005).

⁷ But, due to recent controversies over fiscal pressures, hikes in grain prices, and delivery of program
compensation, the government scaled back expansion of the program in 2005 and is discussing how to
reduce the extent of the program overall (Xu, et al., 2006).

⁸ The annual average official exchange rate in 2001 was 8.28 Chinese yuan to one U.S. dollar. The
purchasing-power parity conversion factor in 2001 was 1.9 yuan to the dollar World Bank. World
Development Indicators. Washington, DC: The World Bank, 2003..

⁹ For example, Xu et al. (2006) found that the value of preprogram production for more than 70 percent
of participating households was less valuable than the compensation rate. Furthermore, the level of
compensation is not trivial relative to the earnings of the typical participating household in the study
region. For example, if an average household in Sichuan Province (Yangtze River basin) received full
compensation, it would receive 340 yuan per capita, an amount equal to 24 percent of the average
household’s preprogram total per capita income in 1999 (Uchida et al., 2005).

¹⁰ Because some households could not be included in the 2005 survey, 78 new households were added
in 2005. We found, however, that the newly sampled households had systematically different household
characteristics for some variables, such as household size and land holdings. In addition, preprogram
data for 1999 that was collected in 2005 from these additional households would likely suffer from
recall bias. Consequently, we excluded these households from our analysis.

¹¹ Unfortunately, we did not have a variable that distinguished between types of off-farm work in the
2005 survey, and thus we relied on the binary variable that indicated whether an individual member had
an off-farm job or not. For 2002 and 2004, however, we do have information regarding the intensity of
off-farm work (Table 2). We find that between these two years the average hours worked per day and the
number of days per year increased for participants but not for nonparticipants. Earnings from off-farm
work and remittances increased for both groups but the differences between the two groups in a
particular year are not statistically significant. The survey did not ask for information on labor hours

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