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Finance and hunger : empirical evidence of the agricultural productivity channel

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  • Claessens, Stijn
  • Feijen, Erik

Abstract

Using cross-country and panel regressions, the authors show that financial sector development significantly reduces undernourishment (hunger), largely through gaining farmers and others access to productivity-enhancing equipment, translating into beneficial income and general effects. They show specifically that a deeper financial sector leads to higher agricultural productivity, including higher cereal yields, through increased fertilizer and tractor use. Higher productivity in turn leads to lower undernourishment. The results are robust to various specifications and econometric tests and imply that a 1 percentage point increase in private credit to GDP reduces undernourishment by 0.22-2.45 percentage points, or about one-quarter the impact of GDP per capita.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4080.

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Date of creation: 01 Dec 2006
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Handle: RePEc:wbk:wbrwps:4080

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Keywords: Economic Theory&Research; Rural Poverty Reduction; Achieving Shared Growth; Inequality;

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References

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  1. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 717-37, August.
  2. Aghion, Philippe & Bolton, Patrick, 1997. "A Theory of Trickle-Down Growth and Development," Review of Economic Studies, Wiley Blackwell, vol. 64(2), pages 151-72, April.
  3. Greenwood, Jeremy & Jovanovic, Boyan, 1990. "Financial Development, Growth, and the Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1076-1107, October.
  4. Robin Burgess & Rohini Pande, 2004. "Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment," The Centre for Market and Public Organisation 04/104, Department of Economics, University of Bristol, UK.
  5. Honohan, Patrick, 2006. "Household financial assets in the process of development," Policy Research Working Paper Series 3965, The World Bank.
  6. Beck, Thorsten & Demirguc-Kunt, Asli & Martinez Peria, Maria Soledad, 2007. "Reaching out: Access to and use of banking services across countries," Journal of Financial Economics, Elsevier, vol. 85(1), pages 234-266, July.
  7. Abhijit V. Banerjee & Esther Duflo, 2000. "Inequality and Growth: What Can the Data Say?," NBER Working Papers 7793, National Bureau of Economic Research, Inc.
  8. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Legal Determinants of External Finance," Working Paper 19443, Harvard University OpenScholar.
  9. Honohan, Patrick, 2005. "Measuring microfinance access : building on existing cross-country data," Policy Research Working Paper Series 3606, The World Bank.
  10. Xavier Gine & Pamela Jakiela & Dean Karlan & Jonathan Morduch, 2006. "Microfinance Games," Working Papers 2102, The Field Experiments Website.
  11. Patrick Honohan, 2004. "Financial Sector Policy and the Poor : Selected Findings and Issues," World Bank Publications, The World Bank, number 14874, October.
  12. Timothy Besley & Robin Burgess, 2003. "Halving Global Poverty," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 3-22, Summer.
  13. George Clarke & Lixin Colin Xu & Heng-fu Zou, 2013. "Finance and Income Inequality: Test of Alternative Theories," Annals of Economics and Finance, Society for AEF, vol. 14(2), pages 493-510, November.
  14. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-98, April.
  15. Ross Levine, 2004. "Finance and Growth: Theory and Evidence," NBER Working Papers 10766, National Bureau of Economic Research, Inc.
  16. World Bank, 2005. "World Development Indicators 2005," World Bank Publications, The World Bank, number 12426, October.
  17. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
  18. Dollar, David & Kraay, Aart, 2002. " Growth Is Good for the Poor," Journal of Economic Growth, Springer, vol. 7(3), pages 195-225, September.
  19. Patrick Honohan, 2004. "Financial development, growth, and poverty: how close are the links?," Policy Research Working Paper Series 3203, The World Bank.
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Cited by:
  1. Sylvain Dessy & Flaubert Mbiekop & Stéphane Pallage, 2005. "On the Mechanics of Trade-Induced Structural Transformation," Cahiers de recherche 0529, CIRPEE.
  2. Claessens, Stijn & Perotti, Enrico, 2007. "Finance and inequality: Channels and evidence," Journal of Comparative Economics, Elsevier, vol. 35(4), pages 748-773, December.
  3. Stijn Claessens & Erik Feijen, 2006. "Financial Sector Development and the Millennium Development Goals," World Bank Publications, The World Bank, number 7145, October.

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