Expenditure fluctuation and consumption loss: rural spatial poverty in China

Poverty is a challenge faced by all countries worldwide. This paper focuses on a factor that has been less well documented: the consumption loss of farmer households caused by the fluctuation of rural public expenditure. Based on large-scale micro household data and climate data, the instrumental variable estimation results show that every 1% fluctuation of rural public expenditure will lead to a 0.113% decrease in farm household consumption. In addition, the fluctuation of rural public expenditure is also a main cause of long-term consumption loss of farmer households. Furthermore, it was found that the impact of rural public expenditure fluctuation on consumption loss is of certain spatial heterogeneity. The worse the spatial environment is, the more serious the consumption loss will be. The policy suggestion of this paper is to ensure a stable scale of rural public expenditure through the central transfer payment, so as to improve the ability of local governments to implement counter cyclical public policies, and transform local finance (industrial investment) into public finance (infrastructure and education) to improve the local space environment. Overall, this study reveals the impact of spatial externality on rural poverty from the perspective of public expenditure fluctuation, and at the same time provides empirical evidence for a better evaluation of the relationship between development and poverty and support for rational regional anti-poverty policies. First published online 08 September 2021