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The Extent of the Market and Stages of Agricultural Specialization

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  • M. Shahe Emran

    ()
    (Department of Economics/Institute for International Economic Policy, George Washington University)

  • Forhad Shilpi

    ()
    (DECRG, World Bank)

Abstract

This paper provides empirical evidence of an U-shaped 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 (2007) and exploit heteroskedasticity for identification of the causal effects of market size. 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.

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Bibliographic Info

Paper provided by The George Washington University, Institute for International Economic Policy in its series Working Papers with number 2008-11.

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Length: 33 pages
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Publication status: Forthcoming in Canadian Journal of Economics
Handle: RePEc:gwi:wpaper:2008-11

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Keywords: Structural Change; Agriculture; Crop Specialization; The Extent of the Market; Market versus Home Production; Commercialization;

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  1. Kuznets, Simon, 1971. "Modern Economic Growth: Findings and Reflections," Nobel Prize in Economics documents 1971-2, Nobel Prize Committee.
  2. Arthur Lewbel, 2003. "Using Heteroskedasticity to Identify and Estimate Mismeasured and Endogenous Regressor Models," Boston College Working Papers in Economics 587, Boston College Department of Economics, revised 15 Dec 2010.
  3. Jacoby, Hanan C, 2000. "Access to Markets and the Benefits of Rural Roads," Economic Journal, Royal Economic Society, vol. 110(465), pages 713-37, July.
  4. Sebnem Kalemli-Ozcan & Bent E. S�rensen & Oved Yosha, 1999. "Risk Sharing and Industrial Specialization: Regional and International Evidence," Working Papers 99-16, Brown University, Department of Economics.
  5. Francisco Alcalá & Antonio Ciccone, 2003. "Trade, extent of the market and economic growth 1960-1996," Economics Working Papers 765, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 2003.
  6. Wacziarg, Romain & Imbs, Jean, 2000. "Stages of Diversification," Research Papers 1653, Stanford University, Graduate School of Business.
  7. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," American Economic Review, American Economic Association, vol. 92(2), pages 160-164, May.
  8. Gollin, Douglas & Parente, Stephen L. & Rogerson, Richard, 2007. "The food problem and the evolution of international income levels," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1230-1255, May.
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Cited by:
  1. Berg, Claudia & Emran, M. Shahe & Shilpi, Forhad, 2013. "Microfinance and Moneylenders: Long-run Effects of MFIs on Informal Credit Market in Bangladesh," MPRA Paper 49040, University Library of Munich, Germany.
  2. Brown, Timothy Tyler, 2014. "How effective are public health departments at preventing mortality?," Economics & Human Biology, Elsevier, vol. 13(C), pages 34-45.
  3. Yang, Dan & Liu, Zimin, 2012. "Does farmer economic organization and agricultural specialization improve rural income? Evidence from China," Economic Modelling, Elsevier, vol. 29(3), pages 990-993.

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