Greening along the Slope and Resource Reallocation: Evidence from China’s Grain for Green Program

Abstract

This paper investigates China’s Grain-for-Green Program, the world’s most extensive afforestation program converting steeply sloped cropland into forested areas, and its effects on environmental and economic sustainability. Our analysis finds evidence for the program’s “silver bullet” effect — simultaneously increasing forest growth on steep terrains and local grain yields. Further analysis shows that such a “silver bullet” effect predominantly appears in regions with ample flat croplands, which allows relocation from less productive steep terrains to more productive flat croplands. This relocation process is greatly facilitated by central government subsidies that help overcome credit constraints that prevent poor farmers from retreating from sloped croplands, as well as increased investment in agricultural infrastructure from local governments to enhance grain productivity on flat croplands. We also find that the program contributes to raising rural school enrollment for boys. This paper underscores the critical factors that influence the efficacy of policies to achieve sustainable economic and environmental objectives.

JEL Classification: O13, Q15, Q23, Q28, Q56, R11