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Externalities in Rural Development: Evidence for China

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  • Ravallion, Martin

Abstract

The author tests for external effects of local economic activity on consumption and income growth at the farm-household level using panel data from four provinces of post-reform rural China. The tests allow for non-stationary fixed effects in the consumption growth process. Evidence is found of geographic externalities, stemming from spillover effects of the level and composition of local economic activity and private returns to local human and physical infrastructure endowments. The results suggest an explanation for rural underdevelopment arising from under-investment in certain externality-generating activities, of which agricultural development emerges as the most important.

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File URL: http://www.wider.unu.edu/stc/repec/pdfs/rp2003/dp2003-54.pdf
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Bibliographic Info

Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number UNU-WIDER Research Paper DP2003/54.

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Length: 28 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:unu:wpaper:dp2003-54

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Keywords: consumption growth; income growth; externalities; panel data; rural China;

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References

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  1. Holtz-Eakin, Douglas, 1988. "Testing for individual effects in autoregressive models," Journal of Econometrics, Elsevier, vol. 39(3), pages 297-307, November.
  2. Besley, T., 1993. "Savings, Credit and Insurance," Papers 167, Princeton, Woodrow Wilson School - Development Studies.
  3. Haggblade, Steven & Hazell, Peter B. & Brown, James, 1988. "Farm-nonfarm linkages in rural sub-Saharan Africa," Policy Research Working Paper Series 6, The World Bank.
  4. Jyotsna Jalan & Martin Ravallion, 1999. "China's Lagging Poor Areas," American Economic Review, American Economic Association, vol. 89(2), pages 301-305, May.
  5. Mark Rosenzweig & Andrew D. Foster, . "Technical Change and Human Capital Returns and Investments: Evidence from the Green Revolution," Home Pages _065, University of Pennsylvania.
  6. Basu, Kaushik & Narayan, Ambar & Ravallion, Martin, 1999. "Is knowledge shared within households?," Policy Research Working Paper Series 2261, The World Bank.
  7. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  8. Mark Rosenzweig & Andrew D. Foster, . "Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture," Home Pages _068, University of Pennsylvania.
  9. Jalan, Jyotsna & Ravallion, Martin, 1998. "Are there dynamic gains from a poor-area development program?," Journal of Public Economics, Elsevier, vol. 67(1), pages 65-85, January.
  10. Lanjouw, Jean O. & Lanjouw, Peter, 2001. "The rural non-farm sector: issues and evidence from developing countries," Agricultural Economics, Blackwell, vol. 26(1), pages 1-23, October.
  11. Chan Ahn, S. & Lee, Y.H., 1994. "GMM Estimation of a Panel Data Regression Model with Time-Varying Individual Effects," Papers 9401, Michigan State - Econometrics and Economic Theory.
  12. Greenwald, Bruce C & Stiglitz, Joseph E, 1986. "Externalities in Economies with Imperfect Information and Incomplete Markets," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 229-64, May.
  13. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November.
  14. Haggblade, Steven & Hazell, P. B. R. & Reardon, Thomas, 2002. "Strategies for stimulating poverty-alleviating growth in the rural nonfarm economy in developing countries:," EPTD discussion papers 92, International Food Policy Research Institute (IFPRI).
  15. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  16. Anderson, Jock R. & Feder, Gershon, 2007. "Agricultural Extension," Handbook of Agricultural Economics, Elsevier.
  17. Jyotsna Jalan & Martin Ravallion, 1998. "Geographic Poverty Traps?," Boston University - Institute for Economic Development 86, Boston University, Institute for Economic Development.
  18. Chen, Shaohua & Ravallion, Martin, 1996. "Data in transition: Assessing rural living standards in Southern China," China Economic Review, Elsevier, vol. 7(1), pages 23-56.
  19. Frank Ellis, 1998. "Household strategies and rural livelihood diversification," Journal of Development Studies, Taylor & Francis Journals, vol. 35(1), pages 1-38.
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Citations

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Cited by:
  1. Zhu, Nong & Luo, Xubei, 2006. "Nonfarm activity and rural income inequality : a case study of two provinces in China," Policy Research Working Paper Series 3811, The World Bank.
  2. Farrow, Andrew & Opondo, Chris & Rao, KPC & Tenywa, Moses & Njeru, Rose & Kashaija, Imelda & Kamugisha, Rick & Ramazani, Michel & Nkonya, Ephraim & Kayiranga, Didace & Lubanga, Lunze & Nabahungu, Leon, 2013. "Selecting sites to prove the concept of IAR4D in the Lake Kivu Pilot Learning Site," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 8(3), September.
  3. Kuyvenhoven, Arie, 2004. "Creating an enabling environment: policy conditions for less-favored areas," Food Policy, Elsevier, vol. 29(4), pages 407-429, August.
  4. Escobal, Javier, 2005. "The Role of Public Infraestructure in Market Development in Rural Peru," MPRA Paper 727, University Library of Munich, Germany.
  5. Zhu, Nong & Luo, Xubei, 2008. "The impact of remittances on rural poverty and inequality in China," Policy Research Working Paper Series 4637, The World Bank.
  6. Valdés, Alberto & Foster, William, 2010. "Reflections on the Role of Agriculture in Pro-Poor Growth," World Development, Elsevier, vol. 38(10), pages 1362-1374, October.
  7. Mariapia Mendola, 2003. "Agricultural Technology and Povertry Reduction: A Micro-Level Analysis of Causal Effects," Development Working Papers 179, Centro Studi Luca d\'Agliano, University of Milano.
  8. Barrett, Christopher B. & Swallow, Brent M., 2006. "Fractal poverty traps," World Development, Elsevier, vol. 34(1), pages 1-15, January.

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