In 2021, China eradicated absolute poverty, shifting its focus to addressing relative and multidimensional poverty. This necessitates comprehensive measures promoting high-quality development in relatively poor areas. The limited capacity of the relatively poor to access livelihood capital restricts their activities, increasing vulnerability. This affects economic development and income growth, highlighting the need for long-term sustainable poverty alleviation strategies. China has a long history of "welfare-to-work" programs, dating back to 1984. In the current context of addressing relative poverty and high-quality development, the "welfare-to-work" policy plays a multi-faceted role, encompassing poverty alleviation, social welfare, and economic development. This policy's resilience is crucial in withstanding shocks like pandemics or natural disasters, offering employment opportunities and skills training. However, the program's effectiveness varies regionally, with challenges including an emphasis on construction over direct relief, insufficient skills among the workforce, and vulnerability to external shocks. This study aims to investigate the sustainability of poverty reduction performance, heterogeneity in its effects, and its role in poverty reduction.

The paper reviews the evolution of China's welfare-to-work policy across four stages: (1) 1949-1983, focusing on disaster relief; (2) 1984-2000, the early stage of poverty alleviation and development; (3) 2000-2020, the special-purpose poverty alleviation policy stage; and (4) 2021-present, a multifunctional comprehensive stage. The literature review also examines existing research on the relationship between welfare-to-work and sustainable poverty alleviation of relative poverty, integrating human capital theory, poverty cycle theory, and sustainable livelihood theory. The authors highlight the importance of endogenous motivation for sustainable poverty alleviation and discuss the role of infrastructure, fiscal intervention, and financial instruments in achieving this goal. Existing studies have limitations in evaluating the performance of a single welfare-to-work policy and quantifying its poverty reduction mechanism in conjunction with regional sustainable development effects. This study addresses these gaps by focusing on the sustainable aspects of poverty reduction within the welfare-to-work framework.

This study employs a multi-dimensional relative poverty evaluation index system and a double difference (DID) method to evaluate the poverty reduction effect of the "welfare-to-work" policy. A panel regression model is used to explore the poverty reduction mechanism, and the Shapley method quantifies the contribution of mechanism variables. The county multidimensional development index (CMDI) serves as the explained variable, constructed using the entropy weight method and the polygon area method based on indicators reflecting economic level, agricultural production level, living standard level, fixed assets investment level, and employment opportunity level. The study uses 2006 as the processing point for DID analysis, comparing counties implementing the policy (treatment group) with those not implementing it (control group). PSM-DID is used for robustness checks. A dynamic effect model assesses the policy's time-varying impact. To test the action mechanism, the study interacts the DID variable with variables representing infrastructure construction, government finance, and financial instruments. Quantile DID analysis examines county-level heterogeneity, and regional heterogeneity is examined by dividing the sample into central, northwest, and southwest regions. Finally, the Shapley value decomposition method is used to determine the contribution of each action mechanism variable to county-level poverty reduction performance.

Benchmark regression analysis reveals a significant positive effect of the welfare-to-work policy on poverty reduction (CMDI). The policy significantly increased GDP per capita, rural per capita disposable income, fixed asset investment, agricultural land quality, and rural employment opportunities. Parallel trend and dynamic effect tests confirm the policy's sustained positive impact on poverty reduction. Placebo tests demonstrate the robustness of the findings. Using alternative methods (PSM-DID and different poverty measures) reinforces the robustness of the positive policy impact. Heterogeneity analysis shows that the policy's effect varies significantly across counties with different development levels, with higher-level areas demonstrating a stronger positive impact. Regional heterogeneity analysis reveals significant positive effects in the central and northwest regions, but an insignificant effect in the southwest region. Analysis of the action mechanism indicates that infrastructure construction, government fiscal intervention, and financial tools all contribute significantly to poverty reduction, but their relative importance varies regionally. Financial tools have a positive impact in the northwest but a negative impact in the southwest. The Shapley value decomposition shows that infrastructure construction contributes most to poverty reduction across all indicators, followed by financial tools and then government fiscal intervention. The relative contributions of each mechanism vary by region and indicator.

The findings demonstrate that China's "welfare-to-work" policy has been a significant driver of poverty reduction, particularly in terms of economic development and income growth. The study highlights the importance of considering regional heterogeneity and the specific mechanisms through which the policy operates. The inverted U-shaped effect suggests potential diminishing returns at very high levels of policy implementation, indicating a need for optimization and targeted interventions. The significant role of infrastructure construction underscores the importance of investing in rural infrastructure to create employment opportunities and improve living standards. The varied impact of financial tools across regions points to the importance of tailoring financial policies to specific regional contexts and development levels. This research contributes to the literature on poverty alleviation by providing a comprehensive assessment of a large-scale policy intervention and identifying key mechanisms for successful poverty reduction.

This study provides strong evidence of the positive and sustainable impact of China's "welfare-to-work" policy on poverty reduction. The policy's effectiveness varies across regions and development levels, highlighting the need for targeted and differentiated approaches. Future research could explore the long-term impacts of the policy, investigate the distributional effects within counties, and further examine the effectiveness of different policy components in diverse contexts. The findings offer valuable insights for policymakers seeking to design and implement effective poverty reduction strategies in developing countries.

The study's reliance on county-level data may mask variations at the individual or household level. The analysis focuses on a specific policy in a particular context, limiting the generalizability of the findings to other settings. While robustness checks are performed, unobserved factors could still influence the results. The study acknowledges limitations in data availability and potential endogeneity issues despite methodological efforts to address them.