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Does Urbanization Affect Rural Poverty? Evidence from Indian Districts

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  • Massimiliano Cal�
  • Carlo Menon

Abstract

Although a high rate of urbanization and a high incidence of rural poverty are two distinct features of many developing countries, there is little knowledge of the effects of the former on the latter. Using a large sample of Indian districts from the 1983–1999 period, we find that urbanization has a substantial and systematic poverty-reducing effect in the surrounding rural areas. The results obtained through an instrumental variable estimation suggest that this effect is causal in nature and is largely attributable to the positive spillovers of urbanization on the rural economy rather than to the movement of the rural poor to urban areas. This rural poverty-reducing effect of urbanization is primarily explained by increased demand for local agricultural products and, to a lesser extent, by urban-rural remittances, the rural land/population ratio, and rural nonfarm employment. Copyright 2013, Oxford University Press.

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Bibliographic Info

Article provided by World Bank Group in its journal The World Bank Economic Review.

Volume (Year): 27 (2013)
Issue (Month): 2 ()
Pages: 171-201

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Handle: RePEc:oup:wbecrv:v:27:y:2013:i:2:p:171-201

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Citations

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Cited by:
  1. Ejaz Ghani & Arti Grover Goswami & William R. Kerr, 2012. "Is India's Manufacturing Sector Moving Away From Cities?," NBER Working Papers 17992, National Bureau of Economic Research, Inc.
  2. Christiaensen, Luc J.M. & Todo, Yasuyuki, 2009. "Poverty Reduction during the Rural-Urban Transformation - The Role of the Missing Middle," 2009 Conference, August 16-22, 2009, Beijing, China 51467, International Association of Agricultural Economists.
  3. Nguyen, Cuong, 2012. "Does Urbanization Help Poverty Reduction in Rural Areas?Evidence from a Developing Country," MPRA Paper 48660, University Library of Munich, Germany.
  4. Christiaensen, Luc & De Weerdt, Joachim & Todo, Yasuyuki, 2013. "Urbanization and poverty reduction -- the role of rural diversification and secondary towns," Policy Research Working Paper Series 6422, The World Bank.

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