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The extent of the market and stages of agricultural specialization

  • M. Shahe Emran
  • Forhad Shilpi

This paper provides empirical evidence of an U-shaped causal 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 (2012) and exploit heteroscedasticity for identification. 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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Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 45 (2012)
Issue (Month): 3 (August)
Pages: 1125-1153

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Handle: RePEc:cje:issued:v:45:y:2012:i:3:p:1125-1153
Contact details of provider: Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
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  1. Sebnem Kalemli-Ozcan & Bent E. Sorensen & Oved Yosha, 1999. "Risk Sharing and Industrial Specialization: Regional and International Evidence," JCPR Working Papers 86, Northwestern University/University of Chicago Joint Center for Poverty Research.
  2. Jean Imbs & Romain Wacziarg, 2003. "Stages of Diversification," American Economic Review, American Economic Association, vol. 93(1), pages 63-86, March.
  3. Kuznets, Simon, 1971. "Modern Economic Growth: Findings and Reflections," Nobel Prize in Economics documents 1971-2, Nobel Prize Committee.
  4. 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.
  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. 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.
  7. 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.
  8. Jacoby, Hanan G., 1998. "Access to markets and the benefits of rural roads," Policy Research Working Paper Series 2028, The World Bank.
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