Cash Transfers and Multiplier Effect: Lessons from the Grain Subsidy Program in China
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This study examines the multiplier effects of the grain subsidy program in China, which is a large
food self-sufficiency project that is implemented as a cash transfer program. Income multiplier
effects have not been examined in the evaluation of the grain subsidy program although increasing
the income of farmers is the original goal of this project. A large number of household-level
observations are employed to measure the program’s income multiplier. Results show that the grain
subsidy program has an unrealized high income multiplier, and the income promotion effect of the
transferred subsidies is from agricultural production derived by intensifying various input uses for
each unit of land. The multiplier effect can be particularly utilized by households with good
education and poor farmers in less developed regions. Hence, to maximize the income multiplier
effect, the grain subsidy distribution method should consider these criteria instead of retaining the
prevalent standard that is based on contracted land areas.