The Road to Specialization in Agricultural Production: Evidence from Rural China

Many rural poor in developing countries live in areas far away from markets and isolation is a key limiting factor to their livelihood. In this paper, we use four waves of a primary panel household survey conducted in 17 remote natural villages in China to study how road access shapes farmers' production patterns, input use, and rural poverty. We adopt a difference-in-difference approach by comparing the outcomes of the households in villages with and without road access, before and after the introduction of each road. Our results show that access to roads facilitates specialization in agricultural production. In natural villages with better road access, farmers plant fewer numbers of crops, purchase more fertilizer, and hire more labor. Consequently, road connections improve household agricultural income and reduce poverty. In addition, road access significantly increases local nonfarm income for the relatively poor households, but not the rich. Overall, our research provides empirical justification on the importance of rural road on agricultural specialization and poverty reduction, especially in isolated and impoverished regions.