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The Impact of Positive Agricultural Income Shocks on Rural Chinese Households

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  • Jessica Leight

Abstract

In the post-collectivization period, rural Chinese households were required to sell part of their grain output to the state at a below-market price; however, increases in this quota price beginning in 1993 generated substantial positive income shocks. These income shocks also varied cross-sectionally in accordance with crop composition given that quotas were systematically larger for rice-producing households, generating a quasi-random source of variation in the size of the shock driven by climatic variation in suitability for rice cultivation. Households induced to experience relatively larger income shocks show evidence of decreased agricultural investment, increased investment in non-agricultural businesses, and increased migration as households gain increased income, consistent with the hypothesis that credit constraints may have constrained some households from entering non-agricultural production ex ante. In addition, there is evidence that these households were concentrated among households who had not previously diversified out of agriculture.

Suggested Citation

  • Jessica Leight, 2020. "The Impact of Positive Agricultural Income Shocks on Rural Chinese Households," The World Bank Economic Review, World Bank, vol. 34(1), pages 210-231.
    • Handle: RePEc:oup:wbecrv:v:34:y:2020:i:1:p:210-231.
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    File URL: http://hdl.handle.net/10.1093/wber/lhy008
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    Cited by:

    1. Shahriar Morshed & Md. Tahidur Rahman & Sheikh Rokonuzzaman & Altaf Hossain, 2022. "The Economic Impact of Monsoon Flood and Its Spillover on the Households of Bangladesh," Journal of Sustainable Development, Canadian Center of Science and Education, vol. 15(3), pages 1-23, May.

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