Impact of Labor Migration and Foreign Exchange Inflow on Rural Poverty Reduction --Evidence from China in 1980-2021

. Foreign exchange inflow plays a crucial role in rural poverty reduction and economic growth in developing countries. Taking China as an example, the authors analyzed the role of labor migration and agricultural foreign exchange inflow in alleviating rural poverty. Based on the time series data from 1980 to 2021, this paper investigated the historical incidence of poverty in China. Moreover, the effects of agricultural development, dynamic migration and foreign exchange inflow on rural poverty reduction in China were deeply analyzed by using the autoregressive distributed lag model (ARDL) from the perspectives of long-term and short-term estimation. Finally, effective measures to reduce poverty were proposed from the aspects of rural incentive plan, introduction of agricultural irrigation technology and provision of economic and technical subsidies, and inspiration to rural targeted poverty alleviation of other developing countries was pointed out.


Introduction
Poverty reduction is an important part of the United Nations Sustainable Development Goals (SDGs). The poor population in the global rural areas accounts for 75% of the total poor population, and the development of agriculture is one of the important measures to reduce rural poverty in the world [1]. Agricultural development is closely related to rural poverty reduction [2], especially for developing countries, foreign exchange inflows in agriculture play an important role in rural economic development. Agricultural remittances from abroad can promote the investment of rural human capital in the country [3], and have a significant role in promoting rural poverty reduction and economic growth in developing countries [4][5][6]. Adams Jr et al. analyzed remittances, inequality and poverty factors based on data from 71 developing countries, and believed that remittances can greatly reduce the severity of poverty [7]. In addition, remittances also have a positive effect on local economic growth and the improvement of people's educational skills, helping to accelerate regional investment, human development, and the improvement of residents' health [4,[8][9][10]. The migration of local labor, as one of the main sources of foreign exchange in the region, may also have a positive impact on rural poverty reduction in the region [11]. Since most of the poor people in developing countries depend on agriculture for their livelihoods, it is reasonable to believe that the growth of agriculture in developing countries can significantly improve the economic level of the region, thereby improving people's living conditions. The oil crisis in the Gulf region in the late 1970s led to a dramatic increase in labor demand, and a large number of labor from other regions moved to Middle Eastern countries. For many developing countries and regions, labor migration, as the main source of regional foreign exchange, can promote local economic growth and improve the living standards of local people by improving the quality of health and education [4][5]10] . The local government has also gradually removed its control over the private sector, realizing the multiplier effect of remittances flowing into the real economy [12] . Therefore, this study takes China as an example to empirically analyze whether foreign exchange inflows from the agricultural sector can have a greater marginal effect on poverty reduction than other sources of income.

Research Methods
This study collected annual data from different sources in China from 1980 to 2021. Among them, agricultural data and rural population poverty data come from the China Rural Statistical Yearbook over the years; foreign exchange inflow, government expenditure and education data come from the World Bank development indicators respectively. All the variable indicators and calculation methods involved in this study are shown in Table 1. The time series analysis is carried out with China as the sample, and the model is set as: First, the ADF test (Augmented Dickey-Fuller) and the PP test (Phillips-Perron) were used to test for the existence of a unit root. Both ADF and PP test the null hypothesis that there is no nonstationary unit root. In the presence of structural transformation, the study further conducted ZA test (Zivot and Andrews) to test the unit root in the presence of structural breakpoints.
Next, a cointegration test is performed. Autoregressive distributed lag model (ARDL) can be used for single cointegration analysis. Its setting is more flexible, and it can be used to analyze stationary time series and first-order single integration series, and the obtained results are consistent with the samples. In addition, long-term and short-term effects can be calculated simultaneously, correcting for endogeneity biases for long-term effects that cannot be estimated. Set up the ARDL model as follows: Among them, 0 is a constant, ε is the residual, t is the year, Δ is the first difference, and the summation sign of all variables indicates the error correction; the F test can be used to evaluate the long-term effect of the time series and the joint significance of the time lag level [14].
For the stability of the model, the study used cumulative sum (CUSUM) and cumulative sum of squares (CUSUMSQ) to test.
The recursive residuals based on the above tests can effectively combine short-term and long-term dynamic results. If the results of the above two tests are below the critical limit of the 5% significance level, the model is stationary. In this study, the JB test was used to test the normal distribution of the samples. The standard value of the JB test is that the probability is greater than 5%. If the estimated result exceeds 5%, the sample is considered to be normally distributed. The study assumes that the rural poverty rate, agricultural GDP, agricultural labor force, foreign exchange inflows, government spending, and education levels are all subject to normal distributions in terms of skewness, kurtosis, and JB statistics, so there are no non-continuous outliers ( Table 2).

Results and Analysis
From the results of the unit root test, the key assumption of the ARDL test is that all variables are not second-order single integers [15]. The study uses ADF, PP, ZA to test the stationarity of samples. The ADF test results show that the two variables of agricultural labor force and education level are time-stationary series, while other variables are first-order single integral series; PP test results show that agricultural labor force, foreign exchange inflows and government expenditure are timestationary series, while other The variables are all first-order single integer sequences ( Table 3). The ZA test is used for the unit root test when there is a structural mutation. The results show that except for the agricultural poverty rate, which is a time-stationary series, all other variables are first-order single-integral series (Table 4). In summary, since there is no second-order single integral sequence, it is reasonable to use the ARDL model in this study. The ARDL model is sensitive to the Akaike Information Criterion (AIC) which selects the second-order lag value, in which the long-term relationship depends on the lag order, and the choice of order affects the acquisition of effective information [16]. The F statistic value more reflects the upper limit of the 5% significance level, and the result has an asymmetric cointegration relationship, so the ARDL model can be used.  Note: ***, ** and * indicate significant at the 1%, 5% and 10% levels, respectively

ARDL Long-term Estimates
The long-term estimation results of the ARDL model show that agricultural development does have a significant positive impact on rural poverty (Table 5). Ali et al. found that, in the long run, agricultural development has the most significant impact on reducing rural poverty [17]. The results show that agricultural labor can also effectively reduce the incidence of rural poverty. As stated in the existing literature, rural population migration can effectively alleviate the occurrence of poverty, and there is an inverse relationship between the two [18][19]. This increase in income level based on the migration of population from developing countries to developed countries will effectively give back to local rural economic development through the inflow of foreign exchange [7,11]. Especially in the 1990s, China's foreign exchange inflows totaled US$37 billion, which was 10.06% of domestic GDP in the same period [8,20], and most of the foreign exchange inflows were used for domestic consumption and commodity purchases [21]. In this study, foreign exchange inflows do have a significant long-term effect on alleviating rural poverty, which is consistent with existing studies [7,11,22]. For developing countries, the foreign exchange generated by the migration of labor from their own countries to other developed countries can quickly accumulate capital in the region, thus effectively exerting the multiplier effect of economic improvement. The coefficient of error correction (ECT) in this study is -1.117, which means that the deviation of the rural poverty rate in the short-run to long-run equilibrium transition is adjusted to 11.17%.

ARDL short-term estimation
The short-term estimation of ARDL model shows that the first-order difference value of agricultural development still has a significant negative impact on rural poverty in the short term. In the short term, the government's agricultural policies in terms of tax relief and corruption control can effectively improve agricultural productivity and alleviate rural poverty [23][24] . In the long run, the impact of such a policy may be limited (Table 6).

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Volume 25 (2022) 399 The coefficient for rural labor is not significant. From 2017 to 2018, China's agricultural labor force accounted for 43.3% of the total labor force. On March 27, 2019, the Chinese government promulgated a new policy named "Isaas" (meaning sympathy) to provide rural female residents with raw materials such as livestock and seeds, and encourage them to participate in agricultural breeding and planting [25]. The logic behind it is that the effective development of agriculture can better absorb surplus labor and create new employment opportunities. Foreign exchange inflows have a more significant impact on alleviating rural poverty in the short term. Although foreign exchange inflows come directly from middle-and high-income immigrant families, they can be transferred to middle-and low-income poor families through the multiplier effect, thereby effectively improving their living standards. For poor families, due to the high cost of migration, most poor families still live in their original places, and it is difficult to enjoy the radiation effect brought by the economic development and labor demand of neighboring countries and regions [22]. The poor residents in these rural areas are the biggest beneficiaries of foreign exchange inflows. The incentive effect brought by foreign exchange inflows has a larger marginal effect on poverty alleviation in rural areas in the short term.

Diagnostic Tests
The results of a series of diagnostic tests such as R2, F test, LM test, JB test, Harvey test, Glejser test and stability (CUSUM, CUSUMSQ) test show that the R2 value shows that nearly 99.7% of the rural poverty variation can be determined by regression relationship Interpretation of independent variables; F value is significant, indicating that the model has a high fit; JB test results are not significant, proving that the data obey a normal distribution; serial correlation LM test is also not significant, it is considered that there is no serial correlation; Harvey and Glejser test For the diagnosis of heteroscedasticity, from the statistical results, both are not significant, proving that there is no heteroscedasticity ( Table 7). The results of the stability test (CUSUM and CUSUMSQ) of the ARDL model showed that, with the 5% significance level as the standard, all variables remained stable during the sample observation period (Figure 2).  Fig. 2 Results of ARDL stability test Note: The solid line is the cumulative sum and the cumulative sum of squares, and the dotted line is the 5% significance level confidence interval.

Robustness Check
In this study, dynamic least squares (DOLS), fully modified least squares (FMOLS) and generalized method of moments (GMM) are used to further examine the impact of foreign exchange inflows from agricultural countries on rural poverty. When performing cointegration analysis of nonstationary panel data, the use of dynamic least squares can effectively eliminate the endogeneity problem and obtain statistics with asymptotic normal distribution [26]. Fully Modified Least Squares provides unbiased estimates under small sample conditions [27]. The generalized law of moments does not assume that the samples are normally distributed, but estimates through the moment conditions. Therefore, for long-term ARDL models, these three estimation methods are still reliable in the presence of cointegration. The results show that most variables are still significant and their signs remain stable, especially foreign exchange inflows, and all model coefficients are significantly negative, further indicating the rationality of the hypothesis in this study (Table 8)

Main conclusions
Using China's time series data from 1980 to 2021 as a sample, this study analyzes the impact of foreign exchange inflows in agriculture based on the migration of domestic labor on poverty reduction in rural areas in the region. Using the ARDL model, the study examined the relationship between long-term, short-term, and variables with time-mutated unit root cointegration. The following main conclusions are drawn: First, the effect of foreign exchange inflows on rural poverty reduction is more reflected in the short term, while the long-term impact of agricultural technology development on rural poverty reduction is more critical. For regions with high population density represented by China, by encouraging the promotion and participation of agricultural planting, irrigation and breeding technologies, a balanced poverty reduction effect can be achieved in the long and short term.
Second, labor migration can not only effectively alleviate the labor demand in the immigrant country, but also create more employment opportunities in the immigrant country. Therefore, a flexible and reasonable visa policy can attract more high-skilled labor to participate in the international division of labor. However, for labor-exporting countries, the high transaction costs caused by international exchange will affect the realization of the poverty reduction effect of local rural residents to a certain extent, and weaken the international competitiveness of labor-exporting countries.

Policy Recommendations
First, governments of developing countries should reduce the transaction costs of capital flows by introducing more flexible foreign exchange inflow and transaction policies, and provide local residents with more convenient and secure financial services by vigorously transforming and building financial and wealth management infrastructure in rural areas. transfer service. For poverty reduction in rural areas, more favorable local immigration policies will help local residents who migrate abroad to participate in local rural and agricultural construction and development through exchange through appropriate channels. This will not only help improve the quality of life of rural residents, but also help the government to increase foreign exchange reserves.
Second, the government should provide cash, subsidies, and crop insurance for agricultural needs by developing new agricultural policy programs. The efficient flow of cash is crucial to the development of agricultural economies in rural areas. For the smallholder economy, good agricultural planting, breeding and irrigation facilities are also conducive to poverty alleviation. Therefore, differentiated rural policies (for small farmers and large-scale operations) can better leverage the multiplier effect of cash flows such as foreign exchange inflows. In the long run, the popularity of electric power facilities in agricultural production, the convenience of supplying raw materials for crops, and the application and subsidies of new energy irrigation technologies will play a more fundamental role in effectively overcoming the decline of the long-term effect of foreign exchange inflows.

Implication
First, as an important part of rural financial targeted poverty alleviation, providing high-quality rural financial public services and products is crucial for giving full play to the role of finance in poverty reduction and alleviation in rural areas [28]. Financial poverty alleviation and poverty alleviation pay attention to the efficiency of capital investment and risk prevention and control at the same time, especially Internet finance, as an important carrier for the development of inclusive finance, has inherent advantages in targeted poverty alleviation because of its inclusive nature and the ability to bridge geographic gaps [29] . However, the existing rural financial systems in developing countries still have problems such as high cost of financial services, inadequate capital management, and imperfect risk protection mechanisms, making it difficult to meet the diversified financial needs BCP Business & Management

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Volume 25 (2022) 402 of rural residents [30]. China's rural financial service system, especially the significance of financial poverty alleviation through foreign exchange inflows, is very important.
Second, foreign exchange inflows can significantly alleviate rural poverty in the short term. The inflow of foreign exchange can have a multiplier effect by increasing the income of local residents to improve living standards and investing in health care, education and the purchase of commodities (such as real estate, etc.). Due to the imperfect financial services such as foreign exchange in rural areas of developing countries at this stage, there is a phenomenon of financial exclusion, that is, financial institutions in rural areas are withdrawing from cities, farmers and rural enterprises are difficult to obtain loans, and funds flow in reverse to cities, etc. [31] , which will have a negative impact on the short-term effect of foreign exchange inflows from agricultural countries in reducing rural poverty. To alleviate financial exclusion, it is necessary to lower the financial threshold, through privatization, tax subsidies and other policy measures, to cultivate new rural financial institutions such as village banks in a targeted manner, overcome the defects of the rural financial market, and reduce the adverse selection of funds for poor farmers, so as to effectively Stimulate the capital flow multiplier effect of foreign exchange inflows in rural poverty reduction. In addition, in addition to strengthening the government's macro intervention in financial institutions, it should also focus on improving the rural financial ecology, creating a favorable environment for credit and information flow, and raising the financial awareness of poor rural residents. Through big data inclusive finance, the credit guarantee of poor farmers can be realized, thereby overcoming the vicious circle of financial exclusion [32].
Third, labor migration can not only effectively alleviate the labor demand of the immigrant country, but also create more employment opportunities for the immigrant country. Therefore, a flexible and reasonable visa policy can attract more high-skilled labor to participate in the international division of labor. However, for labor-exporting countries, the high transaction costs generated by international exchange will affect the realization of the poverty reduction effect of local residents to a certain extent, and reduce the international competitiveness of labor-exporting countries. In the process of comprehensively and deeply promoting the new round of household registration system reform, developing countries should reform the population registration system (such as the unified household registration system for urban and rural areas to the residence permit system transitioning from the unified management of the population) to realize the free movement, employment and housing of rural residents [33]. On the one hand, this can effectively improve the mobility of personnel, capital and resources brought about by labor migration, and on the other hand, it can also realize the differentiated division of labor in different regions based on their own endowments, which is important for rural residents in developing countries to truly enjoy inclusive growth in the era of globalization. The benefits that come with it are crucial.
Fourth, in the long run, the effect of foreign exchange inflows on rural poverty reduction will be attenuated, and the development of agricultural technology will have a more critical impact on rural poverty reduction. guiding role. The realization of the road of agricultural modernization with the characteristics of developing countries should improve the productivity of cultivated land, resource utilization rate and labor productivity through continuous improvement of agricultural technology, so as to realize the increase of agricultural production and income [34]; Encourage farmers to actively participate and achieve a balanced poverty reduction effect in the long-term and short-term.
To sum up, based on the free migration of rural labor, rural finance represented by foreign exchange inflows can exert the multiplier effect of cash flow, which is conducive to alleviating rural poverty. This is especially important for developing countries with high population density and scattered rural settlements. Accelerating the mobility of rural funds is an important guarantee for the realization of agricultural modernization, which is conducive to further promoting the development of inclusive finance in rural areas of developing countries, thereby injecting fresh blood into rural targeted poverty alleviation and rural revitalization in developing countries. In the short term, the positive effect of cross-border capital flows (especially inflows) on the living standards of rural residents and poverty reduction in rural areas should be emphasized; in the long run, the rational allocation of modern agricultural technologies, raw materials and resources is the key to other developing countries. It is a decisive factor for the country to truly achieve comprehensive poverty alleviation in rural areas and to promote the comprehensive development of rural residents' expenditure on medical care, education, and consumption.