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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
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  1. Imbs, Jean & Wacziarg, Romain, 2000. "Stages of Diversification," CEPR Discussion Papers 2642, C.E.P.R. Discussion Papers.
  2. Sebnem Kalemli-Ozcan & Bent E. Sorensen & Oved Yosha, 2000. "Risk sharing and industrial specialization ; regional and international evidence," Research Working Paper RWP 00-06, Federal Reserve Bank of Kansas City.
  3. Kuznets, Simon, 1973. "Modern Economic Growth: Findings and Reflections," American Economic Review, American Economic Association, vol. 63(3), pages 247-58, June.
  4. Jacoby, Hanan C, 2000. "Access to Markets and the Benefits of Rural Roads," Economic Journal, Royal Economic Society, vol. 110(465), pages 713-37, July.
  5. Arthur Lewbel, 2010. "Using Heteroscedasticity to Identify and Estimate Mismeasured and Endogenous Regressor Models," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 30(1), pages 67-80, December.
  6. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," Center for Development Economics 2002-09, Department of Economics, Williams College.
  7. 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.
  8. Douglas Gollin & Stephen L. Parente & Richard Rogerson, 2004. "The Food Problem and the Evolution of International Income Levels," Working Papers 899, Economic Growth Center, Yale University.
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