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The extent of the market and stages of agricultural specialization

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  • M. Shahe Emran
  • Forhad Shilpi

Abstract

This paper provides empirical evidence of an U‐shaped causal relationship between the extent of the market (size of the relevant urban market) and the pattern of crop specialization in a village economy. We use the recent two‐stage estimator developed by Lewbel (2012) and exploit heteroscedasticity for identification. The results suggest that the portfolio of crops in a village economy becomes more diversified initially as the extent of the market increases. However, after the market size reaches a threshold, the production structure starts to specialize again. This evidence on the stages of agricultural diversification is consistent with the stages of diversification identified in the recent literature for the economy as a whole and also for the manufacturing sector. Ce texte fournit des résultats empiriques sur la relation causale en U entre la taille du marché (taille du marché urbain pertinent) et le pattern de spécialisation des cultures dans une économie village. On utilise un estimateur en deux étapes développé par Lewbel (2012) et on exploite l’hétéroskédasticité pour l’identification. Les résultats suggèrent que le portefeuille de cultures dans une économie village devient plus diversifié initialement à proportion que la taille du marché s’accroît. Cependant, après que le marché dépasse un certain seuil, la structure de production tend à se spécialiser à nouveau. Ce résultat sur les stages de diversification agricole sont consistants avec les stages de diversification identifiés dans la littérature récente pour l’économie dans son ensemble et aussi pour le secteur manufacturier.

Suggested Citation

  • M. Shahe Emran & Forhad Shilpi, 2012. "The extent of the market and stages of agricultural specialization," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(3), pages 1125-1153, August.
    • Handle: RePEc:wly:canjec:v:45:y:2012:i:3:p:1125-1153
    DOI: 10.1111/j.1540-5982.2012.01729.x
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    More about this item

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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