Evaluating the Economic Effectiveness of Policy Interventions for Sustainable Agriculture in Degraded Ecosystems

ABSTRACT This study assesses the economic effectiveness of China's Grain to Green Program (GTGP) on sustainable agriculture in key degraded regions, including the Loess Plateau and Qinghai‐Tibet Plateau. The research examines how ecological restoration bolsters economic sustainability, addressing rural livelihood concerns and aligning with UN Sustainable Development Goals on land degradation and poverty, offering insights for global environmental policies. Novelty stems from combining a Difference‐in‐Differences (DiD) framework with Instrumental Variables (IV) using terrain slope to tackle endogeneity, yielding robust causal estimates that surpass limitations of prior correlational analyses. The analysis probes GTGP's effects on agricultural productivity, farm income, soil quality, and water quality, hypothesizing increases in productivity (≥ 0.4 tons/ha), income (> 2000 CNY), soil organic matter (0.2%–0.4%), and water quality indices (0.05–0.15). Secondary data from national and environmental databases (1995–2020), including pre‐2000 for pre‐treatment validations, form the basis, with econometric analysis conducted via DiD and IV on pooled county‐level panels incorporating regional fixed effects and interactions to account for heterogeneity post‐data harmonization. Results show GTGP participation boosts agricultural productivity by 0.5 (DiD) and 0.45 tons/ha (DiD‐IV), farm income by 2174 (DiD) and 2074 CNY (DiD‐IV), soil organic matter by 0.3% (DiD) and 0.28% (DiD‐IV), and water quality by 0.1 (DiD) and 0.09 (DiD‐IV), with DiD‐IV confirming causal effects and amplified impacts in highly degraded areas like the Loess Plateau. These findings highlight GTGP's efficacy in harmonizing ecological and economic objectives, guiding scalable sustainable development strategies.