The fragile ecological environment has been effectively improved, and serious water and soil erosion has been controlled since the implementation of Grain-for-Green Project in the hilly region of Gansu Loess Plateau. Meanwhile, the farmers are regarded as the direct participants of agricultural production and ecological environment protection. However, the interrelation between the implementation of Grain-for-Green Project, locational areas and farmers' income structure was not still explored. The data of 120 farmer households on family situation, land use, operation mode, and household income were obtained by questionnaire survey at Longtan watershed located Dingxi, Gansu province. The farmer households were classified as 3 areas, area Ⅰis the convenient traffic area, Ⅱ is the mid-convenience traffic area, and Ⅲ is the inconvenience traffic areas at Longtan watershed. Effect of traffic facilitation and higher (H) and lower (L) proportions of Grain-for-Green on household income was analyzed by using ANOVAs analysis, regression analysis and path analysis. The results show that the proportion of Grain-for-Green affects farmland areas, and then it affects the corn and potato areas and income. Eventually, it leads that the total farmers' income of lower (L) proportion of Grain-for-Green is higher than higher (H) proportion of Grain-for-Green. The implementation of Grain-for-Green makes the farmland decreasing, and the numbers of labor export increasing. The traffic facilitation effects the rate of labor export to total family number, then it leads to the farmers' income in area I is significantly higher than II and III. The degree of traffic facilitation and the proportion of Grain-for-Green affect the planting income, labor export income, and government subsidy through the following indices of farmland area, converted land area, planting areas of potato and corn, and the number of labor export. Then it affects the household income at the small watershed. In short, the implementation of Grain-for-Green has affected the development of planting industry and labor export industry, and there are regional differences. However, the effect of Grain-for-Green on breeding, forestry and sideline industry is limited in the hilly region of Gansu Loess Plateau. Therefore, the rural infrastructure construction, under forest economy, characteristic breeding and sideline should be developed to reduce the farmers' dependence on planting and Grain-for-Green subsidies in the new round of implement Grain-for-Green. This will help to realize the sustainable development on ecology and economy and improve the rural green productivity in the hilly region of Gansu Loess Plateau.
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