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Agricultural Growth, Employment and Poverty: Theoretical and Empirical Explorations with Indian data (1970-1993)

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    Abstract

    There is a rapidly growing literature on the dual concern of promoting agricultural growth and reducing the incidence of rural poverty. However the analysis of the interaction of growth and poverty is an under researched area of economic policy. This paper attempts to further analyse these dual concerns in an integrated manner. A basic endogenous growth model is developed which explicitly includes poor households and a government that has to decide how to allocate resources to the provision of infrastructure and to the public distribution of food grains. The intertemporal maximisation clearly shows the trade-off the government is facing and the indeterminate outcome. The model derives five key relationships: an agricultural metaproduction function (which allows differing temporal and spatial technical progress), rural employment and wage functions, and relationships for the public distribution of food grains and for rural poverty. These structural equations are estimated in a simultaneous setting for fifteen Indian states using eleven years of data for the period 1970 to 1993. Care is taken in the treatment of missing values, the non-stationarity of many of the state variables, the high level of dependencies between the variables (in the form of extreme multicollinearity and endogeneity) and the presence of structural change. We believe that insufficient care has been taken with these important complications in some studies. Robust structural form, net average elasticities and reduced form impact elasticity multipliers are derived. These estimates give valuable insights into the complicated interdependencies of the policy and endogenous variables. Whilst our broad conclusions tend to reinforce the findings of recent studies there are major differences in our estimates and methodology, which includes the conceptualisation, analytic specification and application of appropriate estimation techniques.

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    File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/doc/uow012098.pdf
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    Bibliographic Info

    Paper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp00-06.

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    Length: 57 pages
    Date of creation: 2000
    Date of revision:
    Handle: RePEc:uow:depec1:wp00-06

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    Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
    Phone: +612 4221-3659
    Fax: +612 4221-3725
    Web page: http://business.uow.edu.au/econ/index.html
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    Keywords: Agricultural growth; poverty; public food distribution; rural and social infrastructure; net average elasticities; impact elasticity multipliers;

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    1. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
    2. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
    3. Sergio T. Rebelo, 1990. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc.
    4. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
    5. Xavier Sala-i-Martin, 1990. "Lecture Notes on Economic Growth(II): Five Prototype Models of Endogenous Growth," NBER Working Papers 3564, National Bureau of Economic Research, Inc.
    6. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    7. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
    8. Ram, Rati, 1986. "Government Size and Economic Growth: A New Framework and Some Evidencefrom Cross-Section and Time-Series Data," American Economic Review, American Economic Association, vol. 76(1), pages 191-203, March.
    9. Danny Quah, 1992. "Empirical cross-section dynamics in economic growth," Discussion Paper / Institute for Empirical Macroeconomics 75, Federal Reserve Bank of Minneapolis.
    10. World Bank, 2000. "India : Policies to Reduce Poverty and Accelerate Sustainable Development," World Bank Other Operational Studies 15106, The World Bank.
    11. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
    12. Xavier Sala-i-Martin, 1990. "Lecture Notes on Economic Growth(I): Introduction to the Literature and Neoclassical Models," NBER Working Papers 3563, National Bureau of Economic Research, Inc.
    13. Kuznets, Simon, 1971. "Modern Economic Growth: Findings and Reflections," Nobel Prize in Economics documents 1971-2, Nobel Prize Committee.
    14. Lau, Lawrence J. & Yotopoulos, Pan A., 1989. "The meta-production function approach to technological change in world agriculture," Journal of Development Economics, Elsevier, vol. 31(2), pages 241-269, October.
    15. Howard Pack, 1994. "Endogenous Growth Theory: Intellectual Appeal and Empirical Shortcomings," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 55-72, Winter.
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