Off-farm diversification offers an important pathway out of poverty while health-impaired rural farmers can hardly seize the opportunity in developing countries. This paper investigates how chronic illness shapes livelihood structure and income generation in rural China. Our sample consists of 3850 rural households in Southern China and we rely on instrumental variable regressions to identify causal effects. We find that farmers with chronic illness tend to diversify towards local off-farm employments, rather than migrants, since local off-farm employments are more likely to act in a strategically complementary way to farming. Further analysis shows that income returns of diversification tend to be substantially higher for the health-impaired. While the relationship between diversification and income presents a conventional inverted U shape for the healthy, it is best categorized as upward sloping with diminishing marginal effects for farmers with chronic illness.

Conservation set-asides face a trade-off between soil erosion control and grain security. Using the Grain for Green Program (GGP) in China’s Loess Plateau as a case study, this study aims to reveal the main source of productivity improvements that help offset the possible negative effect of conservation set-asides on grain supply. For empirical estimation purposes, we combine county-level remote sensing data with detailed grain production information from 209 counties in the Loess Plateau, spanning from 2000 to 2015. The satellite image interpretation and statistical records show that the area of arable land has decreased while the grain supply has been increasing in the Loess Plateau since 2000. A multiple-mediation analysis reveals that the GGP has a negligible total effect on the grain supply, which contributes to the positive mediating effect of multiple cropping, rather than technological progress. Further analysis shows that the increasing land-use intensity exerts higher water stress on areas with less rainfall. The results indicate that studies investigating conservation set-asides and food security relationships should not overlook the changes in land-use intensity, especially in water-scarce areas.