Households in developing countries take various actions to smooth income or consumption as a means of managing or responding to risk. This paper examines migration and land rental market participation as responses to risk in rural China.
The authors show that over the last 30 years, there have been significant reforms in China, which have increased labour mobility and the functioning of rural land markets. The authors emphasise that while limitations still remain, the reforms have to date increased the efficiency of the allocation of these important factors of production.
The document’s findings are listed below:
the nature of exposure to risk affects people’s ability to manage risks
individual shocks can often be managed through intra-village insurance arrangements such as risk-sharing arrangements or social safety nets
however, these strategies work primarily because the shocks that are insured through these strategies are not widespread
as a result, individual income risks do not affect household rental market participation
nevertheless, risks threatening households increase land rental market participation, but decrease participation in migration
because death in a household reduces a household’s redundant labour, these individual labour shocks significantly lower the likelihood that a household will participate in migration
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