Determinants of Poor County Designation

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Having quantifi ed the degree of targeting error, we now turn to a formal

analysis of the determinants of poor county designation. As we have seen,

status as a minority or revolutionary base county has had a signifi cant

effect on poor county designation. In 1990, 637 counties were minority

counties (33 per cent) and 195 were revolutionary base areas (10 per cent).

Twenty per cent of minority counties and 44 per cent of revolutionary

base counties were designated as poor in 1986, accounting for 38 per cent

and 30 per cent, respectively, of all poor counties. In 1993, the number of

minority counties designated as poor more than doubled (to 46 per cent

of all minority counties), but the number of revolutionary base counties

designated as poor increased only slightly. As a share of all poor counties,

however, the number of minority and revolutionary base counties fell to

30 per cent and 16 per cent, respectively, in 1993 because the total number

of poor counties increased substantially.

Using county-level economic data from the Ministry of Agriculture, which

were the basis for poor county designations in 1986,8 Park et al. (2002) studied

the determination of poor county status by estimating probit functions for

poor county designations in 1986 and 1993. Explanatory variables include

income per capita, grain production per capita, industrial share of total

income in the year preceding the designations, status as a minority county or

revolutionary base county, and provincial dummy variables. All explanatory

variables have estimated coeffi cients that are statistically signifi cant. The

fi tted probabilities correctly predict the status of 92 per cent of county

designations in 1986 and 88 per cent in 1993.

The marginal effects on the probability of poor county designation

at the sample means for poor counties are presented in Table 4.9. In

1986 a 1 per cent increase in income per capita reduces the probability

of being designated a poor county by 1.3 per cent, a 1 per cent increase

in grain output per capita decreases the probability by 0.2 per cent, and

an increase in the industrial share of income of 1 per cent reduces the

probability by 0.7 per cent. Designations are less responsive to per capita

income and grain production in 1993 (1.1 per cent and 0.1 per cent,

respectively) and slightly more responsive to industrial share of income

(0.8 per cent). Being a minority or revolutionary base county increases

the probability of designation by 15 per cent and 45 per cent, respectively,

in 1986, and by 17 per cent and 18 per cent, respectively, in 1993. Overall

the responsiveness of poor county designation to both economic and

political variables decreases in 1993, mainly because of the larger number

of countries designated as poor.

Table 4.9 Marginal effects on probability of poor county designation

(from probits evaluated at poor county means)

1986 1993

Log (income per capita) (t–1) –1.31 –1.13

(0.0749) (0.0526)

Log (grain output per capita) (t–1) –0.216 –0.124

(0.0509) (0.0270)

Industrial share of income (t–1) –0.705 –0.769

(0.308) (0.135)

Minority 0.146 0.166

(0.0633) (0.0377)

Revolutionary base 0.441 0.180

(0.0411) (0.0255)

Table 4.9 (continued)

1986 1993

Provincial dummies:

North

Henan –0.240 –0.138

Shandong 0.392 –0.111

Northeast

Liaoning 0.175 0.0882

Jilin – 0.0309

Heilongjiang – 0.0381

Northwest

Inner Mongolia –0.136 0.0140

Shanxi 0.282 –0.00751

Shaanxi 0.126 0.00762

Ningxia – –0.369

Gansu –0.302 0.00431

Qinghai 0.343 –0.297

Xinjiang 0.363 –0.0626

Yangtze River

Zhejiang 0.0834 –0.194

Anhui 0.244 –0.212

Jiangxi –0.0426 –0.0474

Hubei 0.347 0.0533

Hunan –0.182 –0.391

South

Fujian 0.443 0.0613

Guangdong 0.143 –0.00769

Southwest

Guangxi 0.0600 –0.129

Sichuan –0.231 –0.46

Guizhou –0.219 –0.341

Yunnan –0.119 –0.320

Notes: Sample sizes are 1908 and 1953 and pseudo R-squared is 0.49 and 0.54. Marginal

effects for minority and revolutionary base status as well as provincial effects are the effect of

change from 0 to 1. Provincial effects are with respect to Hebei. Marginal effects evaluated at

full sample means in 1986 and 1993 are the following: income –0.129 and –0.704, grain –0.0212

and –0.0773, industrial share –0.0689 and –0.481, minority 0.181 and 0.130, and revolutionary

base 0.143 and 0.216 (all statistically signifi cant at the 1 per cent level).

Source: Park et al. (2002).

Many provincial dummies have large and significant coefficients,

suggesting that there was considerable discrimination against specific

provinces. In the 1986 designations, some poor provinces in the southwest

(Sichuan, Guizhou, Yunnan), center, (Henan, Hunan) and northwest (Inner

Mongolia, Gansu) were at a severe disadvantage, while a county was much

more likely to be designated as poor if it was in the wealthier provinces of

Fujian, Shandong, Hubei, or Xinjiang. The starkest contrast is between

Gansu and Fujian; other things being equal, a county in Gansu was 70

per cent less likely to be designated as poor than a county in Fujian. In

1993, despite a large number of newly designated counties in relatively

disadvantaged provinces, such as Yunnan and Guizhou, southwest provinces

remained at a distinct disadvantage, along with Qinghai and Ningxia in the

northwest and Anhui and Hunan in central PRC.9 Many provinces favored

in 1986 no longer appeared favored in 1993.