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(1) Background-How to solve the problem of forest farmers' choosing jobs after the implementation of the ecological compensation policies has become the key to realize the sustainable development of ecology and economy in the collective forest regions. (2) Methods-The research data came from the household survey conducted by the collective forest rights system reform monitoring project team in Shaanxi Province from July to August 2018, and 441 valid questionnaires were obtained. The OLS regression, intermediary effect model and propensity score matching method ( PSM) were used to analyze the relationship between ecological compensation policies, forest farmers' livelihood strategies and their income. (3) Results-From the perspective of direct effect, the impact of ecological compensation policies on forest farmers' income was significantly positive at the statistical level of 5%, and this effect was still significant after excluding ecological compensation samples or selecting only poverty-stricken counties as samples. From the perspective of mediating effect, the mediating effects of livelihood non-forestry and livelihood diversification on the impact of the ecological compensation policies on forest farmers' income were significant, and the mediating effect accounted for 15.58% and 19.08% respectively. From the perspective of heterogeneity of income effect, compared with those who did not participate in the policies, the total family forestry income of the forest farmers who participated in the policies decreased by 1544 yuan, but their non-forestry management income increased by 5881 yuan, non-forestry wage income increased by 4225 yuan. This indicated that after the forest farmers participated in the ecological compensation policies of public welfare forests, although they sacrificed part of the forest-land management rights to protect the ecological environment, which reduced their forestry income, they could change their livelihood strategies. The household surplus labor forces could increase their household income through non-forest employment and business activities in the secondary and tertiary industries. (4) Conclusions and Discussions-In order to improve the implementation performance of the ecological compensation policies for public welfare forests, the following policy suggestions are put forward : First, establish a dynamic adjustment mechanism for ecological compensation of public welfare forests, regularly monitor the management status of public welfare forests in poverty-stricken regions, and reward and punish them according to the monitoring results, so as to improve the initiative of the forest farmers' policy participation. Second, improve the supporting measures of the ecological compensation policies for public welfare forests and the environment for employment and entrepreneurship in forest areas. At the same time, encourage the forest farmers to rely on public welfare forests resources for employment or entrepreneurship to revitalize forestry resources. Third, strengthen the matching assistance for the forest farmers' livelihood transformation, appropriately guide the forest farmers to develop the forest undergrowth industry, or provide employment for the poor households and create more sources of livelihood for them. Fourth, encourage the transfer of forestland property rights of public welfare forests, guide the forest farmers to transfer the abandoned lands for public welfare forests to those individuals or units with higher management level, so as to promote the rational allocation of forestland resources and rural household labor resources. [ABSTRACT FROM AUTHOR]