What caused Changes in Household Income and Poverty in Rural Sichuan in the early 1990s?

Abstract

The recent entry of China into the WTO has led to a heated debate about the impact of liberalisation upon the poor in China. Aggregate studies of growth and poverty are generally unable to identify the causal pathways through which policies impact upon households, whilst modeling approaches only provide plausible simulations of what may occur. This paper attempts to disentangle the empirical causes of changes in income and poverty transitions in Sichuan during in the early 1990s, a period of major reform. We find that poverty is highly dynamic with income and poverty changes driven by changes in income from farming and animal husbandry. We also find evidence that health, rainfall and grain market shocks have a strong impact on incomes whilst grain quota prices play a small but statistically significant role in social protection