Land Retirement and Nonfarm Labor Market Participation: An Analysis of China's Sloping Land Conversion Program

China's Sloping Land Conversion Program pays more than 32 million households to plant trees on highly erodible cropland, and has effected major land-use changes. Farmers retire land indefinitely but receive time-limited subsidies, after which they, in principle, enter nonfarm employment. We analyze annual data we collected on over 3,000 individuals and plots from 1998-2006, which contain variation in enrollment timing and alternative measures of enrollment, and conclude enrollment has a small but significant and robust positive effect on nonfarm employment. It arises not from alleviating constraints, as recent papers have suggested, but rather from simple farm to nonfarm labor substitution.