Rural Transformation and Household Welfare: Evidence from Non-Farm Employment and High-Value Agriculture in China

This study examines the relationship between rural transformation and household welfare using a nationally representative panel comprising approximately 298,000 household-year observations in rural China from 2003 to 2022. It focuses on two pathways: non-farm employment and high-value agriculture. Fixed-effects estimates, supported by supplementary instrumental-variable results, show that both pathways are associated with higher consumption and lower relative poverty. Their joint welfare association is less than additive, with this pattern concentrated mainly in wage employment. Channel analysis links these associations to wealth accumulation, precautionary savings, and social support networks. Precautionary savings partly offset the welfare-enhancing association by reducing current consumption. Further analyses show substantial heterogeneity across welfare levels and transformation patterns. The findings suggest that uniform rural diversification policies may be insufficient. Differentiated strategies should better align transformation pathways with household comparative advantages to promote inclusive and balanced rural development.