Did the Key Priority Forestry Programs affect income inequality in rural China?

The Natural Forest Protection Program, the Sloping Land Conversion Program and the Desertification Combating Program around Beijing and Tianjing have been gradually launched since 1998 for ecosystem restoration. A large number of rural households have been enrolled in these programs, and the Government of China has designed different polices for these programs, such as subsidies and forbidden or restricted uses. How and how much these programs and policies have affected rural households’ inequality are urgent questions to be answered. The paper used a unique panel data of 1458 sample rural households from 15 counties in China to examine the direct and overall contributions of the Key Priority Forestry Programs (KPFPs) to rural households’ total income inequality. A fixed-effects model was used to estimate the impact of the KPFPs on land-based income and off-farm income. Our empirical results indicate that the direct contribution and overall (including direct and indirect) contribution have experienced a inverted U-shape. Specifically, the overall contributions of the KPFPs’ subsidies to income inequality were less pronounced than that of the direct effects. Furthermore, both the direct contributions and overall contributions to total income inequality changed over time during the study period and differed from one county to another.