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Fluctuation and Spillover: Poverty Reduction Effect of Rural Public Expenditure Scale Based on Spatial Poverty

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Abstract

In rural poverty governance, one of the most significant challenges faced by developing countries is to reduce the negative impact of economic growth fluctuations on poverty reduction, so as to achieve a win-win situation of “economic growth and poverty reduction”. Based on the provincial-level panel data and data of poverty-stricken counties from 2000 to 2016 in China, this paper evaluates the poverty reduction effect of rural public expenditure from the perspectives of cyclical fluctuation and spatial spillover by using the instrumental variable method. It was found that rural public expenditure is pro-cyclical, and after exclusion of the cyclical factors, the essence of fluctuations is still pro-cyclical. Further research also shows that rural public expenditure has a significant spatial spillover effect on poverty reduction, which is even greater than the direct effect. Based on these findings, the policy implications can be that it is critical to provide moderate-scale and stable rural public expenditure, and establish a multi-level and differentiated agricultural insurance system supported by the government. This paper reveals the spatial interaction mechanism between public expenditure and poverty reduction, and also provides reference for correct evaluation of the economic growth and poverty reduction in developing countries.

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Notes

  1. In the empirical study of spatial poverty, the “spatial environment” mainly refers to geographical location, natural conditions, rural infrastructure, and provision of public goods etc. (Daimon 2001; Bird and Shepherd 2003; Epprecht 2011).

  2. The data of rural poor population were derived from Poverty Monitoring Report of Rural China 2017.

  3. According to the archived data of the poor population in 2013, among the poor people in 14 “continuous destitute” areas in China, 42% of them are poor due to illness, 20% due to disasters and 10% due to education. Also, the phenomenon of returning to poverty due to illness and disasters is the most prominent.

  4. For instance, recent empirical studies have shown that central fiscal transfer payment has a flypaper effect (Liu and Ma 2016). Under the effect, once the economic growth slows down, the scale of central transfer payment will decline, and the poverty-stricken areas will face more serious financial problems. In fact, this viewpoint complements the pro-cyclical public expenditure that this study underlines: if the public expenditure is pro-cyclical, a decline in economic growth means a decline in the public expenditure scale; while in China, local finance often plays a dominant role, so the pressure of local poverty reduction is even greater in the period of slow economic growth.

  5. “Central Document No. 1” can be regarded as the first programmatic file of China’s agricultural policies, and has been released every year by the central government since 2004.

  6. For instance, Dinkelman (2011) estimated the impact of South African electrification projects on farmers’ employment, income, and migration, finding that electrification increased employment of women and income of men in the family, and also increased labor inflows into the project areas (experimental group). A similar literature comes from Duflo and Pande (2007) on the assessment of dam construction and rural poverty in India. Their research showed that in the lower reaches of the dam, agricultural income increases and the vulnerability to rainfall shocks also drops significantly. Rural poverty in the lower reaches has also decreased.

  7. For example, Rozelle et al. (2000)argued that economic growth is the most important factor in poverty reduction in China, while poverty alleviation policies have little effect on rural poverty reduction.

  8. Brückner and Gradstein (2014) used precipitation as an instrumental variable to confirm that annual precipitation changes have a significant short-term and positive impact on real GDP in sub-Saharan African countries. Another study of them argued that fluctuations of precipitation also have a significant short-term and positive effect on fluctuations in per capita GDP when the temperature is controlled (Brückner and Gradstein 2013).

  9. Since it is not clear which is more significant, the north-south or the east-west difference, we used the weighted growth rate of temperature and precipitation with 0.1 step technically, followed by the first-stage regression of 2SLS via the weighted value and change of per capita GDP. Then, a set of weighted values with the most significant t value were chosen.

  10. In the county-level data, the per capita rural public expenditure can be directly obtained by dividing “expenditure for supporting agriculture” with “total population at the end of the year” in the Poverty Monitoring Report of Rural China.

  11. The inner-cyclical trend includes time trend and fluctuation trend: yt = τt + πt (t = 1, 2, … T), with τt representing the time trend and πt representing the fluctuation trend.

  12. The annual growth rate of Expper in the samples is 50.707%, and that of Inc is 469.026 yuan.

  13. The gravity model is used to measure the interaction intensity between poverty-stricken counties, which is used as the basis for constructing the spatial weight matrix \( {w}_{ij}={F}_{ij}=\frac{\sqrt{P_i{V}_i{P}_j{V}_j}}{d_{ij}^2} \). In the matrix, Pi and Pj represent the average resident population size of the samples i county and j county; Viand Vj represent the sample mean GDP of i county and j county; dij represents the geographical distance between i county and j county.

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Funding

National Natural Science Foundation of China (71974071; 71974070); Self-determined Research Funds of CCNU from the Colleges’ Basic Research and Operation of MOE (CCNU19TD004); the Fundamental Research Funds for the Central Universities (CCNU20TS036).

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Authors and Affiliations

  1. College of Public Administration, Central China Normal University, Wuhan, 430079, China

    Xiang Luo

  2. School of Management, Wuhan Institute of Technology, Wuhan, 430205, China

    Qing Wan

  3. School of Economics and Management, China University of Geosciences, Wuhan, 430074, China

    Gui Jin

  4. Key Laboratory of Land Surface Pattern and Simulation, Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing, 100101, China

    Gui Jin

  5. College of Urban and Environmental Sciences, Central China Normal University, Wuhan, 430079, China

    Lixia Zhu

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  1. Xiang Luo
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Correspondence to Gui Jin.

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Highlights

1. It was revealed that rural public expenditure is pro-cyclical, and after the exclusion of cyclical factors, the essence of fluctuations is still pro-cyclical.

2. Rural public expenditure was found to have a spatial spillover effect on poverty reduction, which is even greater than the direct effect.

3. The results reveal the spatial interaction mechanism between public expenditure and poverty reduction, and provide reference for correct evaluation of the economic growth and poverty reduction in developing countries.

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Luo, X., Wan, Q., Jin, G. et al. Fluctuation and Spillover: Poverty Reduction Effect of Rural Public Expenditure Scale Based on Spatial Poverty. Appl. Spatial Analysis 14, 247–272 (2021). https://doi.org/10.1007/s12061-020-09356-1

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