Comparing the Ecological and Income Effects of China’s Grassland Ecological Compensation Policy Across Two Policy Rounds

Coordinating ecological restoration with livelihood protection is a central challenge in grassland governance, particularly in regions where ecological fragility coincides with strong dependence on pastoral production. Using panel data for 1008 county-level units in 11 provinces from 2005 to 2020, this paper applies a difference-in-differences approach combined with an event-study design to examine the ecological and income effects of two rounds of China’s Grassland Ecological Compensation Policy (GECP), as well as their underlying mechanisms. The results show that the ecological effects of the GECP are dynamic, peaking two to three years after implementation before gradually stabilizing. The first-round policy significantly improved grassland ecological conditions, increasing the Normalized Difference Vegetation Index (NDVI) by about 3%, but reduced herders’ per capita disposable income by about 6.9%. By contrast, the second-round policy also significantly improved grassland ecological conditions, with an average NDVI increase of about 1.7%, while its income effect was small and statistically insignificant. Mechanism analysis shows that the ecological effects are stronger in areas with lower dependence on animal husbandry and poorer initial grassland conditions, while heterogeneity analysis indicates stronger ecological gains in low-population-density and low-income regions. Overall, the GECP contributes to ecological restoration, but its income gains remain limited.