Assessing the Labor Income Effects of the "Rural Development Initiative" Policy: A Study Based on the Contributions of Assistance Providers

As an important component of the rural revitalization strategy, rural development depends on support from multilevel government investment in the Rural Development Initiative. From the perspective of economic agglomeration, this study analyzes how the Rural Development Initiative policy affects farmers' labor and production activities and conducts an empirical test using longitudinal micro-level household data from representative regions. The study finds that, first, the policy significantly increases the labor income and income from agricultural production and operations of low- and middle-income rural households, an effect arising from comprehensive increases in the labor force participation rate, working hours, and wage rates. Second, the mechanism analysis shows that the policy promotes the agglomeration of capital and labor in rural areas through direct project investment and indirect improvements in rural production and living conditions. This process advances the development of the labor market and enhances its density and allocative efficiency, thereby driving labor income growth. Third, the policy is more effective in increasing the labor income of households with insufficient labor supply and households at risk of falling back into poverty; moreover, projects implemented directly at the household level and without competitive bidding have more pronounced effects on raising labor income. Fourth, the policy yields a return on investment of 35.38%, which stems from the fact that county-level governments use project construction funds more efficiently than provincial and municipal governments, which in turn use them more efficiently than the central government. This implies that differences in the contributions of government assistance providers across administrative levels have important effects on the effectiveness of project-based policies. This study indicates that, in improving the investment mechanism for rural revitalization, attention should be paid to leveraging the synergistic functions of rural development in making rural areas both livable and conducive to employment, providing greater policy support (tilting) to vulnerable groups, and expanding primary-level governments' decision-making authority over the allocation of agriculture-related resources, thereby accelerating urban–rural integrated development and the modernization of agriculture and rural areas.