Impact of rural industrial integration on farmers' income: Evidence from agricultural counties in China

Abstract

Rural industrial integration serves as an effective strategy to promote farmers' wealth, income, and overall rural revitalization. Drawing on the theories of national accounting and transaction costs, this study formulates a mechanism for how rural industrial integration increases farmers' income. It achieves this by increasing the value added of products, increasing short-term agricultural output, and reducing transaction costs. The research focuses on agricultural counties and districts in Liaoning and Shanxi provinces, and constructs a rural industrial integration index using the Herfindahl coefficient. The empirical analysis uses the PVAR model to test the relationship between the development of rural industrial integration and farmers' income. The results show that: the integration of primary and tertiary industries has a positive effect on the growth of farmers' income, while the integration of secondary and tertiary industries has only promoted the growth of farmers' income in Liaoning Province. Different integration models have different effects on the growth of farmers' income. Farmers' income significantly influences the development of rural industrial integration, but its effects vary across regions. Based on these findings, policy recommendations include tailoring strategies based on local resources and asset conditions, promoting vertical and horizontal integration of industrial chains, strengthening financial support, and encouraging the participation of new enterprises. The ultimate goal is to achieve comprehensive development of rural industries and increase farmers' incomes.