On the basis of an econometric study on the variables influencing rural poverty, Fan, Zhang and
Zhang (2002) argued that increasing agricultural output remains the key to poverty reduction, and this is
significantly positively influenced by public investment, in agricultural research as well as in rural infrastructure
and education. They found that government expenditure on education had the largest impact on reducing
both rural poverty and regional inequality, and a significant impact on boosting production. Increased
rural non-farm employment accounted for a significant part of the reduction in both poverty and inequality,
and the large positive impact of rural infrastructure spending was found to come mainly from improved
non-farm employment opportunities. Interestingly, they found low poverty reduction impacts of both public
irrigation spending and loans (micro-credit) provided as part of anti-poverty programmes.