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Are returns to public investment lower in less-favored rural areas?: an empirical analysis of India

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Author Info
Fan, Shenggen
Hazell, P. B. R.

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Abstract

Developing countries allocate scarce government funds to investments in rural areas to achieve the twin goals of agricultural growth and poverty alleviation. Choices have to be made between different types of investments, especially infrastructure, human capital and agricultural research, and between different types of agricultural regions, e.g., irrigated and high- and low-potential rainfed areas. This paper develops an econometric approach and provides empirical evidence on the impact of government investments in rural India using district-level data. While irrigated areas played a key role in agricultural growth during the Green Revolution era, our results show that it is now the rainfed areas, including many less-favored areas that offer the most growth for an additional unit of investment. Moreover, investments in rainfed areas have a much larger impact on poverty alleviation, making this a win-win development strategy. These results have important policy implications, and challenge conventional thinking that public investments in rural India should always be targeted to irrigated and other high-potential areas.

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Paper provided by International Food Policy Research Institute (IFPRI) in its series EPTD discussion papers with number 43.

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Date of creation: 1999
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Handle: RePEc:fpr:eptddp:43

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Related research
Keywords: Poverty India.; Green Revolution India.; Public investment.; Agricultural productivity India.; Agricultural research Evaluation. ;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ghose, A K, 1989. "Rural Poverty and Relative Prices in India," Cambridge Journal of Economics, Oxford University Press, vol. 13(2), pages 307-31, June.
  2. Datt, Gaurav & Ravallion, Martin, 1998. "Farm productivity and rural poverty in India," FCND discussion papers 42, International Food Policy Research Institute (IFPRI). [Downloadable!]
  3. Foster, Andrew D & Rosenzweig, Mark R, 1996. "Technical Change and Human-Capital Returns and Investments: Evidence from the Green Revolution," American Economic Review, American Economic Association, vol. 86(4), pages 931-53, September. [Downloadable!] (restricted)
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  4. Datt, Gaurav & Ravallion, Martin, 1997. "Why have some Indian states performed better than others at reducing rural poverty?," FCND discussion papers 26, International Food Policy Research Institute (IFPRI). [Downloadable!]
  5. Bell, Clive & Rich, Robert, 1994. "Rural Poverty and Aggregate Agricultural Performance in Post-independence India," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 56(2), pages 111-33, May.
  6. Ravallion, Martin & Datt, Gaurav, 1995. "Growth and poverty in rural India," Policy Research Working Paper Series 1405, The World Bank. [Downloadable!]
  7. Scherr, Sara J. & Hazell, P. B. R., 1994. "Sustainable agricultural development strategies in fragile lands:," EPTD discussion papers 1, International Food Policy Research Institute (IFPRI). [Downloadable!]
  8. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May. [Downloadable!] (restricted)
  9. Lau, Lawrence J, 1979. "On Exact Index Numbers," The Review of Economics and Statistics, MIT Press, vol. 61(1), pages 73-82, February. [Downloadable!] (restricted)
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