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Working Paper 266 - Structural Transformation and Income Distribution: Kuznets and Beyond

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  • Ravi Kanbur

Abstract

This paper investigates the empirical linkages between production risk and technology adoption decisions among agricultural farmers in Tanzania and Uganda using a balanced household panel dataset from the World Bank’s LSMS-ISA project. Applying a moment-based approach and a Mundlak-Chamberlain IV fixed effects model to control for endogeneity and unobserved heterogeneity, I find that the first four moments of production significantly explain changes in the probability of adopting chemical fertilizer, improved seeds, and pesticides. While the use of these modern inputs is found to be risk-decreasing, estimates suggest that the higher their purchasing costs, the greater the cost of farmers’ private risk bearing. Under the assumption of a moderate risk aversion, the risk premium amounts to 12.7% and 30.5% of the expected production revenues respectively in Tanzania and Uganda, largely explained by production volatility and downside risk aversion. This underscores the need to account for farmers’ preferences towards higher order moments when designing technology adoption policies.

Suggested Citation

  • Ravi Kanbur, 2017. "Working Paper 266 - Structural Transformation and Income Distribution: Kuznets and Beyond," Working Paper Series 2377, African Development Bank.
    • Handle: RePEc:adb:adbwps:2377
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    References listed on IDEAS

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    1. Yanan Li & Ravi Kanbur & Carl Lin, 2019. "Minimum Wage Competition between Local Governments in China," Journal of Development Studies, Taylor & Francis Journals, vol. 55(12), pages 2479-2494, December.
    2. repec:idb:brikps:60098 is not listed on IDEAS
    3. Kanbur, Ravi, 2012. "Does Kuznets Still Matter?," Working Papers 128794, Cornell University, Department of Applied Economics and Management.
    4. Ricardo Paes de Barros & Francisco H.G. Ferreira & Jose R. Molinas Vega & Jaime Saavedra Chanduvi, 2009. "Measuring Inequality of Opportunities in Latin America and the Caribbean," World Bank Publications, The World Bank, number 2580, September.
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    6. Ravi Kanbur & Xiaobo Zhang, 2005. "Fifty Years of Regional Inequality in China: a Journey Through Central Planning, Reform, and Openness," Review of Development Economics, Wiley Blackwell, vol. 9(1), pages 87-106, February.
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    Cited by:

    1. Clementi,Fabio & Fabiani,Michele & Molini,Vasco & Schettino,Francesco, 2022. "Is Inequality Systematically Underestimated in Sub-Saharan Africa ? A Proposal toOvercome the Problem," Policy Research Working Paper Series 10058, The World Bank.
    2. Cinar Baymul & Kunal Sen, 2020. "Was Kuznets Right? New Evidence on the Relationship between Structural Transformation and Inequality," Journal of Development Studies, Taylor & Francis Journals, vol. 56(9), pages 1643-1662, July.
    3. Zhou, Yixiao & Tyers, Rod, 2019. "Automation and inequality in China," China Economic Review, Elsevier, vol. 58(C).
    4. Armida Alisjahbana & Kyunghoon Kim & Kunal Sen & Andy Sumner & Arief Anshory Yusuf, 2020. "The developer's dilemma: A survey of structural transformation and inequality dynamics," WIDER Working Paper Series wp-2020-35, World Institute for Development Economic Research (UNU-WIDER).
    5. D.P. von Fintel, 2018. "Long-Run Spatial Inequality in South Africa: Early Settlement Patterns and Separate Development," Studies in Economics and Econometrics, Taylor & Francis Journals, vol. 42(2), pages 81-102, August.
    6. Jena , Devasmita, 2021. "International Trade, Structural Transformation and Economic Catch-Up: An Analysis of The Asean Experiences," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 46(3), pages 135-155, September.
    7. Diego Martínez-Navarro & Ignacio Amate-Fortes & Almudena Guarnido-Rueda, 2020. "Inequality and development: is the Kuznets curve in effect today?," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 37(3), pages 703-735, October.

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