Will remittances suppress or increase household income in the migrant-sending areas? Modeling the effects of remittances in rural China

There are ongoing debates about whether remittances suppress or increase household income in the migrant-sending areas. The literature has not explained the heterogeneous results in a unified framework. This paper proposes a new concept, remittance capitalization potential (RCP), to conceptualise the possible switch between suppression effect and incentivization effect of remittances in the migrant-sending areas. The theoretical model reveals that remittances suppress household income in the migrant-sending areas when the RCP level is below a certain threshold, while remittances help increase household income in the migrant-sending areas when the RCP level is above a certain threshold. Moreover, the factors that affect the RCP level, such as the level of household human capital, ultimately determine whether remittances exert suppression or incentivization effect in the migrant-sending areas. Using China Family Panel Studies (CFPS) data, this paper adopts the method of instrumental variables to estimate how the level of household human capital alters the effect of remittances on household income from agricultural production in rural China. The models show that in the households with the head agricultural producers who are illiterate or semi-literate, the remittances suppress the agricultural income significantly. In the households with the head agricultural producers who are literate, however, the impact of remittances on the agricultural income switch to be positive significantly. The robustness tests not only support the results from the base models, but also confirm that the level of household human capital works as an influencing factor of RCP and determines whether remittances suppress or increase household income in the migrant-sending areas.     

Remittances and expenditure patterns of the left behinds in rural China

This paper investigates how private transfers from internal migration in China affect the expenditure behavior of families left behind in rural areas. Using data from the Rural–Urban Migration in China (RUMiC) survey, we assess the impact of remittances sent to rural households on consumption-type and investment-type expenditures. We apply propensity score matching to account for the selection of households into receiving remittances, and estimate average treatment effects on the treated. We find that remittances supplement income in rural China and lead to increased consumption rather than increased investment. Moreover, we find evidence of a strong negative impact on education expenditures, which could be detrimental to sustaining investment in human capital in poor rural areas in China.     

Relative deprivation and health revisited: New evidence from middle-aged and older adults in rural China

The critical role of income in individual health is not only reflected in the direct effect of income but also derived from the relative income levels within cohorts. This study first constructs relative deprivation indicators to measure the relative income levels of rural households by taking village-level households as the reference group. Using the data from the four waves of the China Health and Retirement Longitudinal Study (2011–2018), we apply a panel event study approach to detect the impact of relative deprivation on the health status of rural middle-aged and older adults. The estimation results show the significantly negative and persistent effects of deterioration in relative deprivation on the physical and mental health outcomes of these adults. In rural China, the impact of relative deprivation on individual health shows significant age and wealth differences, but no significant gender differences are observed. Meanwhile, local collective culture plays important roles. The findings have important implications for the government to improve public health policies and promote healthy aging.     

The impact of circular migration on a village economy

The author examines the economy of a rural village in Indonesia in which a high proportion of households rely on remittances from urban informal sector earnings. Household income and per capita income are analyzed according to whether or not households have at least one temporary migrant, and by the sex and age of the household head. Findings indicate that "remittances from short-term circular migration push many households into the middle and upper income ranges. However, the wealthiest households continue to rely on traditional high earning activities and do not depend on remittances. The poorest households are scattered among those who rely on remittances and those still totally dependent upon traditional low earning village activities, regardless of the sex and age of the household head."     

Subjective well-being and its determinants in rural China

A national household survey for 2002, containing a specially designed module on subjective well-being, is used to estimate pioneering happiness functions in rural China. The variables that are predicted by economic theory to be important for happiness prove to be relatively unimportant. Our analysis suggests that we need to draw on psychology and sociology if we are to understand. Rural China is not a hotbed of dissatisfaction with life, possibly because most people are found to confine their reference groups to the village. Relative income within the village and relative income over time, both in the past and expected in the future, are shown to be important for current happiness, whereas current income is less so. Even amidst the poverty of rural China, attitudes, social comparisons and aspirations influence subjective well-being. The implications of the findings for the future and for policy are considered.     

The Determinants of Nonfarm Income Diversification in Rural Peru

This paper shows that in Peruvian rural areas, there has been substantial growth over the past decade in household employment outside of own-farming. At present 51% of the net income of rural households comes from these off-farm activities, and thus they certainly cannot be considered as “marginal.” The reasons households diversify their incomes are several. Access to public assets such as roads and private assets such as education and credit is an important factor in diversification. Increasing access to these assets will help rural households to increase their self-employment as well as wage employment in the nonfarm sector.     

Formal and informal rural credit in the Mekong River Delta of Vietnam: Interaction and accessibility

This paper examines the factors influencing rural households’ access to credit in the Vietnamese market. Analysis confirms an interaction effect between informal and formal credit sectors in which informal credit positively influences accessibility to microcredit programs. Ignoring this interaction effect may lead to microcredit providers making loan decisions that are less than optimal. In the formal credit sector, the lowest income group faces more credit rationing than other groups, despite the fact that microcredit programs are designed to target households at the bottom of the income pyramid. Results demonstrate that land holding status, informal interest, and informal loan duration are important factors influencing access to informal credit. Factors influencing microcredit accessibility include local government employee status, credit group membership, a “poor” certificate, educational attainment, working skills and village road access. To reduce reliance on informal credit and improve microcredit accessibility, rural households should actively participate in a microcredit group.     

Diversify and prosper: Peasant households participating in emerging markets in northeast rural China

Following the sequence of radical rural reforms commencing in 1978, many peasant households in the People's Republic of China (PRC) have been actively diversifying away from time-honored grain production. This article examines the microlevel rewards accruing to a sample of village households located in the northeast province of Liaoning. In particular, we identify and then measure how such diversification affects household income, the level of employment, and the returns to labor. Two explanatory variables are constructed as surrogates for income-source diversification in a series of household production functions. Our results provide robust evidence that households that move from grain enhance significantly several indicators of their economic well-being.     

Sources of capital and income for communal area farmers in Kavango: Implications for agriculture and rural development

A survey based on a structured questionnaire was conducted at the beginning of 1995 to identify sources of capital and income for rural households in Kavango. The survey, which covered 80 households, revealed that there was a high dependence on external income sources. Pensions were the major source of income for the highest proportion of all households (33 per cent), followed by wages (23 per cent) and brewing (10 per cent). Other sources of income of similar importance to brewing were crop sales, non‐formal work and cash remittances.

Livestock were a minor source of income but a major source of capital and food security. Households with smaller cattle herds depended more on cattle for income and food security than those with larger herds. Cattle were a highly valued production resource that was only consumed during times of crisis and only in the absence of less valuable assets that could be easily liquidated. Grain storage was more popular among groups with the lowest income. By various criteria, female‐headed households always tended to be in the group of households categorised as the poorest of the poor. However, given sufficient income, over one third of them would purchase cattle to diversify their investment portfolio.

This article presents a number of potential strategies for improving the incomes of rural households in Kavango. These include the promotion of equitable livestock ownership and better use of the grazing resource through community management, intensification of cropping and the implementation of labour‐intensive programmes to develop rural infrastructure.     

ECONOMIC ANALYSIS ON THE URBAN–RURAL DISPARITY IN HUMAN CAPITAL IN CHINA

With China's economic development and capital accumulation in the industrial sectors, the human capital level of the labours moving from the rural areas could no longer meet the demand of the industrial sectors. Therefore, “structural shortage of technical labour” emerged in the labour market as a result of excess of demand for high‐skilled workers. Previous literature mostly focused on the relationship between rural human‐capital level and labour movement, income change and economic growth, but in this article, the authors focus on the study of the relative disparity of urban and rural human capital and labour movement, as well as the effect of the change of urban–rural human capital gap on industrial output, profit and social welfare. This article shows that bridging the urban–rural gap in respect of human capital level could not only improve the situation of the “structural shortage of technical labour,” but also have a positive effect on the general social welfare.     

Remittances and child labour in Ghana: Does the gender of the household head matter?

This study investigates the effect of remittance income on child labour and the role of gender in Ghana. Data were sourced from the Ghana Living Standards Survey Round 6. In order to solve the issue of endogeneity, we adopt the instrumental variable approach. The study finds evidence that, irrespective of whoever is the head of the household, the total effect of remittances on child labour is negative. However, the negative effect is much higher for female-headed households. It is recommended that more mobile money transfer outlets be established and the cost of transferring money be reduced to the barest minimum so as to enable households to maximise the benefits of the remittances they receive. Furthermore, financial transfers should be given to female household heads upon the condition of school attendance by their children so as to reduce child labour.     

Retesting the Separability of China＇s Rural Households

This article retests the separability of China’s rural households in light of growing doubt about the sustainability of high economic growth in China.If a household’s production decisions are "separable "from the household’s consumption decisions,generally this suggests there is no surplus labor.Many scholars aver that China’s surplus rural labor has spurred rapid economic growth,but concerns have arisen as to whether China still has surplus labor available.We investigate this issue using rural household panel data from 1993 to 2009.The regression results confirm that households in rural China have progressed from being non-separable to separable.The estimation results for both the entire country and regions reject the separability hypothesis before 2004 but fail to reject the hypothesis after 2004(with the exception of the central region).These results suggest that China ’s surplus labor supply is dwindling,especially in the eastern and the western regions.The sustainability of China’s high economic growth is questionable in the absence of a large reservoir of surplus rural labor.     

The role of off-farm employment in the rural energy consumption transition — A village-level analysis in Jiangxi Province, China

Energy consumption in rural areas in China is characterized by high consumption of fuelwood, straw and other biomass. Off-farm employment can play an important role in the transition towards more sustainable sources of energy by increasing rural household incomes and reducing the amount of labor available for biomass collection. The purpose of this paper is to examine the impact of off-farm employment on rural household energy consumption choices, and to disentangle the various causal relationships that play a role in this respect. To this end, a hybrid farm household/village computable general equilibrium (CGE) model is used that has been calibrated for a remote village in Northeast Jiangxi Province where fuelwood is the main source of energy. The model takes into account nonseparability of farm household production and consumption decisions as well as linkages within the village between households involved in off-farm employment and households with no members working off-farm. Contrary to previous research for a richer region in rural China, we find that fuelwood is not an inferior good. The positive impact of more food consumption on fuelwood collection more than compensates the higher leisure demand associated with higher incomes. Shifts in production activities and in prices on village factor markets caused by increased labour scarcity (the lost-labour effect of off-farm employment), on the other hand, cause a reduction in fuelwood collection and consumption. This lost-labour effect is much stronger for migration than for local off-farm employment, because the latter can more easily be combined with on-farm work and fuelwood collection. For local off-farm employment the income effect dominates the lost-labour effect, resulting in a positive overall impact of higher off-farm participation on fuelwood consumption. For migration, on the other hand, the income effect and the lost-labour effect are almost equal in size. Hence, the amount of fuelwood collected and consumed does not change much when households participate in migration. The final conclusion is therefore that increased off-farm employment opportunities do not promote the transition of rural energy use in the poorer regions of rural China.     

Rural entrepreneurship and job creation: the hybrid identity of village-cadre-entrepreneurs

Poverty alleviation has been one of the most important issues in human society, especially in rural areas. As a critical solution to settle rural poverty, entrepreneurship increases rural entrepreneurs' income and creates job opportunities in rural communities. However, why rural entrepreneurs have different employment choices remains underexplored. This research focuses on village cadres' entrepreneurship in China, exploring how the hybrid identity of village-cadre-entrepreneurs interacts and further influences their motivation to create more jobs. Furthermore, we theorize how contextual factors, such as village isolation, lineage group, and regional collective mobilization, shape the logic of the employment strategy resulting from this hybrid identity. Based on a nationwide representative sample comprising 4346 rural entrepreneurs and their enterprises, our findings indicate that village-cadre-entrepreneurs are motivated to provide more work opportunities within the system of village self-governance. With job creation, village-cadre-entrepreneurs preserve and strengthen the “patron” image of village-cadre identity and mitigate the “businessman” image of entrepreneur identity. Further to this, the positive effect of village-cadre-entrepreneurs offering more work opportunities via entrepreneurial activities is more prominent when villages i) are more isolated from the external environment, ii) have more lineage groups, or iii) are in areas with more collective mobilization. This study highlights the impact of rural governance logic in rural entrepreneurial activities and the significance of village-cadre-entrepreneurs' role in job creation and rural poverty alleviation.     

Preferential policies and income inequality: Evidence from Special Economic Zones and Open Cities in China

This paper examines whether cities with preferential policies have higher inequality in household disposable income per capita than cities without preferential policies in urban China. “Preferential policies” refers to the autonomy and deregulation given to Special Economic Zones (SEZs) and Open Cities, allowing them to experiment with market policies and reforms, as the country moves from a state-controlled economy towards a market-oriented economy. While the effect of these policies on economic growth is extensively documented, their relationship with income inequality remains undetermined. Subgroup decompositions of income inequality, using the China Household Income Project's urban datasets of over 6000 households and 20,000 individuals from of up to 70 cities from 12 provinces, were used to identify income inequality gaps between cities with and without preferential policies. The results reveal that while income inequality increased in urban China from 1988 to 2007, the change was lower for cities awarded preferential policies across regions. Furthermore, the decompositions by region indicate that cities receiving preferential policy treatment had higher income growth but a lesser increase in income inequality than cities without preferential policies in each region. Finally, cities receiving preferential policies were able to increase the share of income of the poorest 40% of households while reducing the share of the richest 10%.     

Food poverty,hunger and household production in rural Eastern Cape households

More than two decades since the advent of democracy in South Africa, the place of small-scale agriculture in rural development, poverty alleviation and food security remains ambiguous and highly contested. However, there is now some new evidence that official income poverty estimates in South Africa may be underestimating the contribution of rural, land-based livelihoods when measuring household well-being. This paper aims to explore this possibility further by identifying how household production activities are associated with improved food security among rural Eastern Cape households in the former homelands. The analysis is based on data from Statistics South Africa’s 2008/9 Living Conditions Survey and its annual General Household Surveys. In adopting a food poverty lens, the findings suggest that hunger levels are lower among farming households in the Eastern Cape even though a higher percentage of these households (relative to non-farming households) live below the national food poverty line. The paper concludes by discussing some implications for policy.     

Rural centralized residences and the health of the acting heads of rural households: The case of China

The rural centralized residence (RCenR) has been adopting to promote rural development in 24 provinces in China. Acting heads of rural households are older and their health is worse than average rural residents. However, their health has greater externalities since they play a central role in families and in daily village operations. It is therefore important to investigate the causal effect of RCenR on the health of the acting heads, which remains econometrically underexplored. This study controls for cross-prefecture contiguous-villages group fixed effects and uses the expected once-off government housing subsidy as the instrumental variable to estimate the causal effect of RCenR on the health of acting heads. It is found that RCenR significantly improves acting heads' health through increased income, reduced strenuous agricultural activities, greater use of clean energy and clean water, as well as easier access to local medical services. These findings are important because they can guide developing countries to improve their rural development policies.     

Going Home: Evacuation-Migration Decisions of Hurricane Katrina Survivors

In the wake of Hurricane Katrina, many evacuees from the Gulf region began the difficult process of deciding whether to rebuild or restart elsewhere. We examine pre-Katrina Gulf residents' decision to return to the postdisaster Gulf region—which we call the “return migration” decision. We estimate two separate return migration models, first using data from a mail survey of individuals in the affected region and then focusing on self-administered questionnaires of evacuees in Houston. Our results indicate that return migration can be affected by household income; age; education level; and employment, marital, and home ownership status, but the results depend on the population under consideration. We find no effect of “connection to place” on the return migration decision. Although the effect of income is relatively small within subsamples, we find a much higher proportion of middle income households planning to return than lower income households when comparing across the subsamples. In addition, the real wage differential between home and host region influences the likelihood of return. Larger implicit costs, in terms of foregone wages for returning, induce a lower likelihood of return. Exploiting this difference at the individual level, we are able to produce estimates of willingness to pay (WTP) to return home. Average WTP to return home for a sample of relatively poor households is estimated at $1.94 per hour or $3954 per year.     

Are Bilateral Remittances Countercyclical?

By putting together a relatively large data set on bilateral remittances of emigrants, this paper is able to shed light on the important hypothesis of smoothing. The smoothing hypothesis is that remittances are countercyclical with respect to income in the worker’s country of origin (the recipient of the remittance), while procyclical with respect to income in the migrant’s host country (the sender of the remittance). The econometric results confirm the hypothesis. This affirmation of smoothing is important for two reasons. First, it suggests that remittances should be placed on the list of criteria for an optimum currency area. Second, it brings into doubt plans by governments in some developing countries to harness remittances for their own use, in that government spending in these countries generally fails the test of countercyclicality which remittances pass.     

Promoting pro-poor growth through infrastructure investment: Evidence from the Targeted Poverty Alleviation program in China

This paper empirically estimates the effects of infrastructure investments on the level and distribution of impoverished households' income, utilizing the arguably exogenous investment shock from the Targeted Poverty Alleviation program in China. We focus on the agricultural income of poor rural households. We also examine whether these infrastructure investments increase or decrease income inequality within the impoverished group. We distinguish among different types of infrastructure investment, aiming to identify the investments effective in promoting growth in agricultural income, especially for the poorest. Based on a comprehensive household-level administrative dataset and econometric analysis, we find that electricity infrastructure significantly increases poor households' agricultural income and that the income benefit is equally distributed among the poor; agricultural irrigation infrastructure raises agricultural income significantly and delivers more benefit to the poorest households. An examination of the mechanism shows that both electricity and irrigation infrastructure increase the probability of participating in agricultural work and therefore increase agricultural income. These findings imply that, through increasing the utilization of agricultural land and the labor of impoverished households, electricity and irrigation infrastructure investments in rural impoverished areas are likely to lead to pro-poor and sustainable development.