The bittersweet fruits of industrialization in rural China: The cost of environment and the benefit from off-farm employment

- This paper improves our understanding of the tradeoffs between environmental pollution and economic growth in rural areas of China by conducting an empirical analysis based on a set of nationwide panel data collected in 2008 and 2012 and covering five provinces, 101 villages, and 2020 households. As far as we know, our nationally representative data is unique and representative.
- Evidence is found to suggest that although industrial pollution incidence is found to be positively related with the level of local off-farm employment, this relationship is statistically insignificant when migrant labor is included. It can be explained as areas that less economically benefited from industrialization tent to have more labors migrated out to seek higher wage income.
- Empirical analysis shows that Industrial pollution incidence is higher in areas with high population density in rural China. But the distance from village to capital of the province or township seat do not contribute toward environmental inequality. Rural areas in inland provinces as Sichuan and Jilin tend to be suffered more from industrial pollution in China when other variables are controlled.

While it is widely accepted that industrialization has brought both environmental pollution and economic growth in rural areas of China, very little is known about whether the negative effects of industrial pollution on rural residents have been proportionally offset by positive effects due to improvements in off-farm income. This paper improves our understanding of these tradeoffs by conducting an empirical analysis based on a set of nationwide panel data collected in 2008 and 2012 and covering five provinces, 101 villages, and 2020 households. Evidence is found to suggest that it is not always the case that rural households that are affected by pollution reap the off-farm employment benefits associated with industrialization. Specifically, although industrial pollution incidence is found to be positively related with the level of local off-farm employment, this relationship is statistically insignificant when migrant labor is included. It can be explained as areas that less economically benefited from industrialization tent to have more labors migrated out and the average annual wage income of one migrant labor is much higher than that of local off-farm labor.