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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. Dean Karlan & Xavier Gine & Jonathan Morduch & Pamela Jakiela, 2006. "Microfinance Games," Working Papers 936, Economic Growth Center, Yale University.
  2. 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.
  3. Robin Burgess & Rohini Pande, 2003. "Do rural banks matter? evidence from the Indian social banking experiment," LSE Research Online Documents on Economics 2244, London School of Economics and Political Science, LSE Library.
  4. 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.
  5. Greenwood, J. & Jovanovic, B., 1988. "Financial Development, Growth, And The Distribution Of Income," RCER Working Papers 131, University of Rochester - Center for Economic Research (RCER).
  6. George Clarke & Lixin Colin Xu & Heng-fu Zou, 2003. "Finance and Income Inequality: Test of Alternative Theories," CEMA Working Papers 493, China Economics and Management Academy, Central University of Finance and Economics.
  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 La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," NBER Working Papers 5879, National Bureau of Economic Research, Inc.
  9. Dollar, David & Kraay, Aart, 2001. "Growth is good for the poor," Policy Research Working Paper Series 2587, The World Bank.
  10. repec:wbk:wbpubs:12426 is not listed on IDEAS
  11. Honohan, Patrick, 2006. "Household financial assets in the process of development," Policy Research Working Paper Series 3965, The World Bank.
  12. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
  13. Timothy Besley & Robin Burgess, 2003. "Halving Global Poverty," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 3-22, Summer.
  14. Beck, Thorsten & Demirguc-Kunt, Asli & Martinez Peria, Maria Soledad, 2005. "Reaching out : access to and use of banking services across countries," Policy Research Working Paper Series 3754, The World Bank.
  15. Ross Levine, 2004. "Finance and Growth: Theory and Evidence," NBER Working Papers 10766, National Bureau of Economic Research, Inc.
  16. Patrick Honohan, 2004. "Financial Sector Policy and the Poor : Selected Findings and Issues," World Bank Publications, The World Bank, number 14874.
  17. Honohan, Patrick, 2005. "Measuring microfinance access : building on existing cross-country data," Policy Research Working Paper Series 3606, The World Bank.
  18. Patrick Honohan, 2004. "Financial development, growth, and poverty: how close are the links?," Policy Research Working Paper Series 3203, The World Bank.
  19. 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.
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Citations

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Cited by:
  1. Stijn Claessens & Erik Feijen, 2006. "Financial Sector Development and the Millennium Development Goals," World Bank Publications, The World Bank, number 7145.
  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. Sylvain Dessy & Flaubert Mbiekop & Stéphane Pallage, 2005. "On the Mechanics of Trade-Induced Structural Transformation," Cahiers de recherche 0529, CIRPEE.

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