Does Eco-Compensation Alleviate Rural Poverty? New Evidence from National Key Ecological Function Areas in China

The Transfer Payment Policy of National Key Ecological Functional Areas (TPEFAP), a well-known ecological compensation (eco-compensation) scheme in China, has been proposed by the government to alleviate ecological poverty and protect the environment. In literature, the effectiveness of the TPEFAP on environmental conservation has been widely examined, while few pay attention to the effect of the TPEFAP on poverty alleviation, especially with the consideration of its spatial spillovers as well. In this paper, we utilize panel data covering the key ecological functional areas of China during the period 2011-2018 to evaluate the impact of the TPEFAP on poverty alleviation and also its spatial spillovers by employing the synthetic control method (SCM) and the dynamic spatial Durbin model, respectively. Specifically, we apply the entropy weight method (EWM) to calculate the multidimensional poverty index (MPI) and measure pro-poor effect in terms of MPI change. The results show that: (1) TPEFAP has stable positive effects on MPI in Hubei, Yunnan, Jilin, Gansu, and Ningxia, while the impact on Qinghai fluctuates. (2) MPI presents a significant spatial correlation. Furthermore, both the direct and indirect effects of TPEFAP on MPI are significant and stable positive, for both short- or long-term. (3) For potential channels, rural non-farm employment, rural labor mobility, and agricultural productivity are the key pathways through which the TPEFAP can alleviate poverty both in local and adjacent provinces. However, it is difficult to find significant positive spatial spillovers for the TPEFAP if only the natural resources scale is considered. This study indicates that the government should pay attention to the policy expectations of ecological poverty alleviation and, in future eco-compensation, must further increase the coverage of subsidies and diversify the forms of subsidies.