Livelihood Capital, Risk Response, and Rural Household Poverty Vulnerability: An Empirical Experience Based in China

Abstract

Consolidating the achievements of poverty alleviation and preventing the recurrence of poverty are key priorities for China's future poverty governance. This paper examines the impact of livelihood capital on the vulnerability of rural households to poverty and the underlying mechanisms, using a livelihood capital framework. First, the relationship between livelihood capital and the vulnerability of rural household poverty is discussed theoretically, followed by empirical analysis based on data from the China Family Panel Study (CFPS) spanning 2012 to 2022. To address endogeneity concerns, the average livelihood capital of other households with similar family structures within the same village is used as an instrumental variable for testing. The results show that livelihood capital—particularly human, material, financial, and social capital—has a significant negative effect on the vulnerability of rural households to poverty. Heterogeneity analysis reveals that livelihood capital exerts a stronger suppressive effect on the poverty vulnerability of low‐income households, households with three or less members, and those in western regions. Further analysis indicates that livelihood capital enhances rural households' risk‐bearing capacity, thereby reducing their vulnerability to poverty. Overall, the findings suggest that increasing livelihood capital, especially human and material capital, is crucial for reducing the poverty vulnerability of rural households.