Poverty Dynamics of Households in Rural China

Abstract

Abstract The objective of our study is to identify patterns and causes of households' transitions into and out of poverty using the long household panel data on rural China in 1989–2009. We propose a discrete‐time multi‐spell duration model that not only corrects for unobserved heterogeneity, but also addresses the endogeneity due to dynamic selection associated with household's livelihood strategies. The household choosing farming or out‐migration as a main livelihood strategy was more likely to escape from persistent poverty than those taking local non‐agricultural employment. The present study emphasizes the central role of agriculture in helping the chronically poor escape from poverty.