Since the reform and opening up, the government has gradually built a multi-level system of fiscal support for agriculture. As fiscal transfers to agriculture have intensified and pro-rural policies have been progressively implemented, an important question arises: Can fiscal agricultural transfers be allocated in a manner that precisely targets low-income households and thereby achieves a meaningful assistance effect?

Using data from China’s National Fixed-Point Survey (NFS), this paper explores the assistance effect of fiscal support for agriculture on low-income households from the perspective of production-oriented and welfare-oriented subsidies. The findings reveal that fiscal subsidies significantly contribute to increases in rural household incomes and exhibit a clear assistance effect on low-income households. Compared with welfare-oriented subsidies, production-oriented subsidies have a stronger income-boosting effect on low-income households. Mechanism testing reveals that welfare-oriented subsidies operate primarily by enhancing human-capital accumulation among members of low-income households, which in turn facilitates the professionalization of agricultural production and the occupational formalization of off-farm employment. Production-oriented subsidies work mainly by raising agricultural productivity and shifting low-income households’ preference toward off-farm employment and production-scale expansion. Heterogeneity analysis reveals that the assistance effect is particularly significant for low-income households in economically underdeveloped villages, villages where township governments are located, households whose main income comes from production and business activities, households primarily engaged in agriculture, households whose heads work in agriculture, and low-income households with low education attainment.

The contributions of this paper are threefold: First, it extends the literature on the economic effect of fiscal agricultural policies. Second, it expands the theoretical framework linking fiscal agricultural policies to income distribution. Third, it highlights the differentiated functions of distinct types of fiscal support for agriculture.