One of the core missions of economic development is to find feasible ways of alleviating poverty. One popular option is to promote intercropping. This strategy, also known as tree-based intercropping, involves the mixed cultivation of trees for wood/timber or fruit/nuts and annual crops in the same field [1
]. Mixed cultivation has been advocated as an alternative to traditional farming systems, with the potential to increase the productivity of land and to diversify production [2
]. It is widely seen as a sustainable agricultural innovation, with enormous ecological, agronomic and economic potential [4
]. As such, it has been widely promoted since the late 1970s, particularly in marginal regions with fragile ecosystems, experiencing land degradation, water scarcity and unsustainable exploitation of natural resources [7
In rural China, intercropping systems have been widely promoted in order to diversify households’ income generation sources and to improve the sustainability of land use [8
]. It is estimated that the intercropped area has grown to more than 28 million hectares, which is most concentrated in the country’s western arid and semi-arid regions [9
]. In our case study, where intercropping is being promoted by the regional government in Xinjiang, there is a large program to encourage small-scale farmers, most of whom are of Uyghur origin, to plant fruit trees among their crops with the aim of improving agricultural output [11
]. The program also aims to reverse the ecological problems of the increasing shortages of irrigation water and the degradation of arable land. Participants involved in this program are required to set-aside part of their land for intercropping. In return, the local government reimburses some of their initial investment costs (either in cash and/or in-kind).
Many studies have focused on the overall income effect of intercropping and the sale (or consumption) of timber, fruits and firewood, and found program participation positively contributes to smallholders’ gross income [12
]. However, some others argue that the income, particularly of the landless and the poor, remains unchanged (or even decreased) primarily due to inequalities in land endowments, limited market access and/or poor road transportation [15
]. Moreover, shortcomings in program implementation, caused by inadequate budgets, lack of institutional environment support and/or inefficient project management can also undermine the effectiveness of such programs [17
In addition, the impact of such similar agroforestry schemes in stimulating a transfer away from off-farm transfer also gives rise to concern, especially since off-farm employment is increasingly recognized as an important way of reducing poverty. (While China has experienced remarkable economic growth in recent decades, social scientists and policy makers continue to be concerned about the widespread and persistent rural poverty, particularly in the western part of the country [19
]. There is a widespread view that off-farm employment is the main way of escaping poverty [20
]. For many rural households, off-farm income is a critical, if not most important, income source and off-farm income helps to narrow the income gap between rural households [22
]. However, it is recognized that households in developing countries often confront a range of barriers, specifically a lack of human capital and constraining institutional environments that make it difficult for them to be involved in off-farm activities [23
]. For instance, in China, the combination of insecure land tenure rights, and poorly developed rural land and credit markets generates high transaction costs for farm labor immigration [18
]. As such, the topic of off-farm transfer is of on-going concern.) Analysis of the American experience indicates participation in agroforestry programs often leads to participants to reduce their off-farm employment [25
]. Ahearn et al. found that participation in Payment for Environmental Service (PES) program is negatively correlated with the likelihood of off-farm income generating activities [26
]. In China, similar studies have produced mixed conclusions. A widely studied Chinese example is the Sloping Land Conversion Program (SLCP) (the SLCP involves converting croplands on land prone to erosion into forests and/or grassland—see Xu et al. and Uchida et al. [27
]. Groom et al. found that the SLCP increased participants’ off-farm involvement, particularly among lower income households [28
], while Uchida et al. found that smallholders’ off-farm activities are negatively related to participation in the SLCP [29
]. (Liu et al. found that the SLCP had a significantly positive effect on rural income growth (based on a sample of 1968 households and covering the period between 1996 and 2004) [30
]. By contrast, Xu et al. found no significant effect on aggregate income between 1999 and 2002 [27
]. Uchida et al. emphasized that the effect of the SLCP is location-specific and that participants in Gansu and Sichuan experienced a net loss, but those in Ningxia and Shaanxi experienced a net gain [28
Thus, there are question marks over the income impacts of intercropping programs. Major international donors, such as the World Bank, often conduct poverty alleviation assessments of their or others’ programs [31
]. (Almost every policy or program proposed for developing countries by the World Bank and other international donors has a key focus on poverty reduction, thus assessing the effect that these policies and programs have on poverty reduction is a central and key issue [31
].) Assessing the impacts of an intercropping program on smallholders’ incomes in poor regions facing ecological degradation is critically significant. Given the central role of intercropping systems in the land use strategies and livelihoods of farmers, it is surprising to find very little evidence of such studies being conducted within the context of rural China. Two exceptions to this are the scant evidence that exists to the description by Spoor and Shi, and Spoor et al., who reported that the introduction of crop-tree intercropping system diversified small-scale farmers sources of income, but that they faced potential marketing risks as the program they studied was expanding too quickly [11
Given complex institutional environments that surround program implementation and the local variations in these, it is pertinent to question how the implementation of agroforestry programs influences participants’ incomes [30
]. The intercropping program in rural Xinjiang offers an interesting case study. First, it is home to a large number of rural poor [32
]. This remote and less-developed region is experiencing soil salinity and frequent droughts [34
]. Intercropping is thought to have the potential to help change land use patterns within a region with fragile ecosystems and to help local smallholder farmers to escape from the poverty trap. Second, arable land plays an essential role in supporting smallholders’ livelihoods [11
]. An assessment of the program’s impact on farmer’s incomes is policy relevant, as it will help focus future policy interventions. Third, unlike elsewhere in China, where off-farm activities are a main source of income, a large number of the rural labor force in this region work in agriculture [35
]. An analysis of the impacts of the program will provide an important contribution to understanding the links between agriculture, the rural labor market and the incidence of poverty in this poor region. Finally, this is a politically sensitive area [36
], which makes it difficult (particularly for foreigners) to conduct field survey in the countryside, which means developments in this region are under-reported [38
]. The unique household dataset we have gathered provides a rich research resource and valuable empirical evidence for assessing and for furthering the debate about the effects that agroforestry schemes have on smallholder farmers’ incomes.
The objectives of this study are twofold. First, it aims to assess the impact that the intercropping program has had on smallholder farmers’ incomes and, second, to explore the issues and constraints experienced in implementing the program. The paper contributes to the literature that it makes use of what is known as the propensity score matching (PSM) technique to addressing the problem of potentially missing data in assessing a program’s performance. More specifically, it is impossible to observe one unit (such as a household or farmer) simultaneously in two different states, making it difficult to find a valid comparison (control) group for the treatment group [41
]. (For instance, suppose
= the outcome after participation in the program (treatment), and
= the outcome without participation (control), then the program impact
. Assessing the different impact between different units (
) could be biased because the units have different characteristics. Ideally, one should compare the same unit in two different states at the same time (
). However, data on these two states is lacking (and thus unobservable) since each unit either participates or does not participate in a program, giving rise to what is known as the missing data problem [42
].) The PSM deals with this missing data problem by generating two groups of units that are statistically distinguishable and identical, with the sole exception that one group (the treatment group) participates in the program and the other (the control group) does not [42
]. Findings can contribute to the deliberation of the income effects of agroforestry program for poverty reduction in transition economics in developing counties.
The remainder of this paper is organized as follows. Section 2
provides a theoretical background that discusses the links between intercropping and incomes. Section 3
introduces the research area and the ways in which intercropping has been encouraged within it. The following section presents an empirical assessment of the impact of the intercropping program on participants’ incomes by using the propensity score matching technique, supplemented with some anecdotal observations. The conclusions and policy implications are reported in Section 5
2. The Theoretical Links between Intercropping and Income
In this section, we develop a conceptual framework to explain the likely effects of intercropping program on smallholders’ incomes. We distinguish two different effects: the direct effects induced by more intensive labor input, the availability of subsidies (in cash and or in kind), the effects that these have on farmer’s propensity to participate in the off-farm labor market, and the indirect effects which are induced by enhancing land tenure security.
The direct income effect stems from the fact that intercropping is a labor-intensive practice and this can influence program participants’ propensity to take up off-farm jobs [45
]. Our field observations confirm that the crop-tree intercropping system demands more labor input in terms of field management, than a mono-cropping system (for detailed discussion on the intercropping system, see Section 3
), which means that, when households adopt intercropping, they have less time to take up off-farm activities. It is worth noting that the availability of labor force is usually the key constraint facing rural households in developing countries who want to improve their livelihoods [15
]. This is particularly the case in rural China. Chinese agriculture production is more labor-intensive than in many other developing countries [47
]. As such, adopting intercropping is expected to have opportunity costs for households’ off-farm income.
Another direct income effect is related to the availability of subsidies. Participants in intercropping programs are provided with a governmental subsidy, whether in cash and/or in kind [27
]. The cash element of this subsidy can be used as “windfall” income, which can reduce the pressure to work off–farm or use it to make agricultural investments [18
]. In other words, the subsidies associated with program participation can provide households with supplementary income and relax the monetary constraints facing them [29
]. (Households may also face high monetary and temporal transaction costs (such as transportation and job hunting) when doing off-farm jobs. This is particularly the case, as in many rural areas in developing countries, because of poorly developed labor and credit markets [23
]. Governmental measures could be applied to reduce these transaction cost constraints [29
].) As such, the subsidy element of the intercropping program should enhance participants’ income, but depending at a large extent on the subsidy deliver in program implementation.
The indirect income effect arises from the potential of intercropping to increase efficiency by leading to a rearrangement of the labor-land input ratio in farming. This can have a two way effect. On the one hand, insecure land tenure may discourage farmers from investing their labor and dedicating their land to intercropping as there is a risk that they will not reap the future yields. Meanwhile, farmers may be constrained from switching from farming to off-farming due to worries about losing land that they are no longer using. However, intercropping can also help secure land tenure by giving land users more rights and thus lower the risk of losing the land, and consequently leads participants to rearrange their labor-land input ratio in farming [50
]. This is particularly relevant in China, as it has been demonstrated that the adaptation of intercropping can significantly enhance land tenure security [8
More specifically, land tenure insecurity can often discourage households’ land-related investment incentives and jeopardize agricultural productivity [52
]. At the same time, insecure land tenure also inhibits households’ participation in land rental markets, since with no secure tenure it is not possible to sell, mortgage or rent out land [18
]. Successive land reforms in rural China, have provided peasant farmers with usufruct rights with different lease lengths, but it is widely argued that they have done little to enhance land tenure security [55
]. (For instance, the 2007 Property Law granted farmers the right to retain and inherit their land rights when the 30-year period is ended, implicitly giving farmers perpetual possession of land in the future [57
]. In 2008, the central government further extended the land contract period from thirty years to an unspecified “long-term” period and it was also specified that land certificates should be issued to farmers [56
].) One main reason for this is that the central government has not clarified how the legal and institutional arrangements should be implemented [59
]. Thus, these rules have not been effectively enforced [57
]. As a result, unintended policy outcomes have occurred. Local governments in many rural areas are often unwilling to issue land certificates [62
]. In rural China, the land registration systems are ill-defined and the legal system incomplete [62
]. Land tenure insecurity remains widespread, as there is often a very real risk of expropriation through land adjustments at the village level [56
]. The tenure framework that exists in China constrains rural labor from transferring from agricultural production to more profitable off-farm jobs because of fears of losing land left behind after migration [29
]. This implies that farmers who are capable to engage in more profitable off-farm activities may be blocked in agricultural production, resulting to a mismatch between the composition of labor and land inputs at the household level.
Numerous empirical studies have demonstrated that intercropping trees on cultivated land can enhance land tenure security [58
]. This is mainly because farmers treat tree planting as a type of long-term investment and believe it helps to extend land use and occupation [50
]. Growing trees is a long-term project, usually extending over decades. Thus, farmers often begin growing trees as a coping strategy, to protest against land expropriation or third party infringement [50
]. In this sense, intercropping enhances land tenure security. Secure land tenure can be expected to stimulate investment in agricultural production [8
]. In addition, the land rental market and participation in off farm activities can also both be stimulated as there is less risk of losing rented-out land, thereby relaxing the farm-labor transfer and improving the balance between inputs of labor and land. Through these mechanisms, intercropping is likely to induce households’ enthusiasm to invest in increasing the productivity of their land (leading to higher farming income), and to boost their participation in the off-farm labor market.
Farmers in rural Xinjiang face a relatively lower possibility of land expropriation, as there have been fewer land adjustments there than in other central and eastern rural regions of China [11
]. However, Rao et al. identified that formal tenure institutions only play a modest role in this region in shaping land tenure security [65
]. Informal tenure arrangements (mainly based on a foundation of trust between villagers) play a much more central role. Intercropping trees on land are often be motivated by the desire to establish assets on the land, and more importantly, to extend the land occupation period [8
]. From the perspective of enhancing security of tenure, intercropping is likely to increase both farming income and off-farm income.
Analysis above shows that participation in an intercropping program can affect farmers’ decisions about how to allocate labor and land, and directly or indirectly influence the (farm and off-farm) income derived by participating farm households. However, these influences can pull in different directions. The effect of this program on participants’ incomes will be determined by the combination of these direct and indirect effects, and we now turn our attention to empirically establishing these effects.
While there has been a notable increase in incomes in rural Xinjiang over the past decade, they remain far below the national average level [11
]. To address the high incidence of poverty, the XJUAR government proposed implementing a diversified crop-tree intercropping system in late 2004. This analysis has attempted to examine the impact of the intercropping program on participants’ incomes. It applies the propensity score matching approach to a 352-household survey dataset. It also uses anecdotal observations to further explore the underlying reasons behind the income effect that we estimated.
One striking finding is that the income impact of the intercropping program on all types of income was negative (but not statistically significant for off-farm income). This finding indicates that smallholders who participated in the program suffered significantly losses in both their farming and gross incomes. This is consistent with the finding by Uchida et al., who demonstrated that the SLCP participants in Gansu and Sichuan experienced a net income loss [28
]. Despite a lack of statistically significant evidence on the impact that the program had on off farm income, we did observe a decline in participation in off farm activities among program participants. This is also a cause for concern as off-farm activities are the main channel for escaping poverty in rural China [28
Given the predominant role that farming (particularly cultivating cotton) plays in smallholders’ livelihood strategies, it was somewhat of a shock to find that, rather than improving farm incomes, the program actually damaged them. This finding leads us to question how effectively the program was implemented and the level of commitment that smallholders showed in it. However, it is unlikely that the government will abandon the intercropping program for three main reasons. First, it is very difficult to restrain farming on arable land in Xinjiang province, as was done in the SLCP (which also aimed to improve environmental services) because cotton production provides a substantial share of farming households’ net incomes [11
], and because Xinjiang is a strategic and crucial grain and cotton production base in China [67
]. Second, crop-tree intercropping can change the traditional mono-cropping system and lead to diversified income generation sources. Third, intercropping can simultaneously safeguard food and cotton production and generate some environmental benefits.
However, besides the intrinsic shortcomings in the program design and implementation (such as targeting inefficiency), a number of other factors meant that many participants experienced a decline in incomes. There was a significant decline in crop yields, increased demand for scarce water resources, increased demand for labor due to the labor-intensive nature of intercropping, and insecure land tenure. Participants find themselves trapped in a dilemma: they can neither quit intercropping nor pour more investment into their fruit trees for two crucial reasons. If they quit now, the initial and substantial investments they have made in tree planting would have to be written off. Second, local officials have considerable power in implementing policy, particularly over land tenure (and particularly in this politically-sensitive ethnic minority region) [55
], and this power of land allocation may dissuade many smallholders from quitting the scheme for fear of losing their land.
To offset the substantial negative effect that this program has had on participants and to achieve a win-win outcome by meeting both environmental and developmental goals, we recommend implementing a number of counter measures. First, the local government should, as a matter of urgency, improve subsidy levels and extend the subsidy period. A payment for environmental service approach could be a useful policy instrument as it has the potential to induce land users’ incentives to improve their natural resource management, while also helping to alleviate poverty and has been widely used to finance natural resource conservation programs in many places around the world [87
]. Second, as the subsidy will inevitably be terminated at some point in the future, it would be helpful to carry out effective rural land tenure reforms to enhance small-scale farmers’ land tenure security. Third, although there has been a rapid expansion of fruit tree planting, it is unclear where the market for these fruits is [11
]. Thus, governments should assist farm households to build and access local, and more extended, markets and even extend these markets to outside Xinjiang province, in order to create new income generating sources. Finally, more off-farm opportunities and trainings should be created and provided.
We are aware that our analysis has some limitedness. First, it only focuses on the income impact. A comprehensive assessment of the long-run sustainability of the intercropping system that includes the socioeconomic and ecological impacts in an integrated framework would useful extend the scope of this research. Second, the empirical study is based on small-scale 2008 cross-sectional data, and anecdotal discussions, based on the 2014 interview data. There may well be a time-lag between these two datasets, and results obtained from a larger-scale panel data would probably be more reliable.