Land Retirement and Nonfarm Labor Market Participation: An Analysis of China’s Sloping Land Conversion Program

China’s Sloping Land Conversion Program pays more than 32 million households to plant trees on highly erodible cropland, and has effected major land-use changes. Farmers retire land indefinitely but receive time-limited subsidies, after which they, in principle, enter nonfarm employment. We analyze annual data we collected on over 3,000 individuals and plots from 1998–2006, which contain variation in enrollment timing and alternative measures of enrollment, and conclude enrollment has a small but significant and robust positive effect on nonfarm employment. It arises not from alleviating constraints, as recent papers have suggested, but rather from simple farm to nonfarm labor substitution.