Pro-rural policies, income and inequality : Evaluating a cash-for-work program in rural China

Despite the dramatic reduction of poverty in China over the past thirty-five years, poverty has not been fully eradicated in rural areas, and in the context of growing inequalities, it remains a national concern. This paper examines a local cash-for-work program launched in mountainous areas of Beijing municipality in December 2004, with a view to understanding both the challenges and achievements of pro-poor programs in China. Using original household survey data, we first highlight the fairly good targeting performance of the program towards the local poor. Second, participation equations provide evidence of increasing local income without crowding out local agricultural activities. Finally, a decomposition of household income inequality by source highlights the strongly equalizing effect of the program on peasants' income.