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Estimating the Relative Benefits of Agricultural Growth on the Distribution of Expenditures

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  • Ligon, Ethan
  • Sadoulet, Elisabeth

Abstract

Does the sectoral composition of aggregate economic growth affect poverty? We ask whether agricultural growth in developing countries increases the expenditures of poorer households more than growth in other sectors. While some reduced form analyses have tackled this question using either country-level time series data, regional panel data for one country, or cross-sectional country data, this paper is unusual in using panel data for many countries. We improve on much of the existing literature by devising an instrumental variables strategy to correct for the endogeneity of sectoral GDP growth, involving averaging over sectoral income growth rates for neighboring countries. Our principal finding from our instrumental variable estimator is that the estimated elasticities associated with growth in agricultural income are significantly greater than for non-agricultural income for all but the extreme top and bottom deciles. In the middle range of the income distribution the effect of a given GDP growth due to agriculture is 3–4 times larger than if it was due to non-agricultural activities. Having established that on average growth in GDP originating in agriculture is more beneficial for poorer deciles, we finally explore whether this is a pattern which holds across different groupings of countries. A second important finding is that there is heterogeneity across some groupings. Most particularly, we find that it is the poorest people in the poorest countries for whom agricultural income growth is the most beneficial.

Suggested Citation

  • Ligon, Ethan & Sadoulet, Elisabeth, 2018. "Estimating the Relative Benefits of Agricultural Growth on the Distribution of Expenditures," World Development, Elsevier, vol. 109(C), pages 417-428.
  • Handle: RePEc:eee:wdevel:v:109:y:2018:i:c:p:417-428
    DOI: 10.1016/j.worlddev.2016.12.007
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    2. Evan Borkum & Anitha Sivasankaran & Elena Moroz & Matt Sloan, "undated". "Evaluation of the Fruit Tree Productivity Project in Morocco: Final Report on Irrigation Activities," Mathematica Policy Research Reports 09644639569a4e0a8cb85cee5, Mathematica Policy Research.
    3. Chowdhury, Shyamal & Smits, Joeri & Sun, Qigang, 2020. "Contract structure, time preference, and technology adoption," GLO Discussion Paper Series 633, Global Labor Organization (GLO).
    4. Antoci, Angelo & Borghesi, Simone & Iannucci, Gianluca & Ticci, Elisa, 2019. "Land use and pollution in a two-sector evolutionary model," Structural Change and Economic Dynamics, Elsevier, vol. 50(C), pages 114-125.
    5. Tyack, Nicholas, 2020. "Genetic resources and agricultural productivity in the developing world," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304277, Agricultural and Applied Economics Association.
    6. Salah Eddine SARI HASSOUN & Abdelkader SAHED & Khayereddine Salim ADDA & Asma Hadjira SEBBANE, 2020. "Not a long ago, the agriculture sector was the main pillar of any economy in the world. It not only provides food production, but it participates to the expansion of the economic growth as well. In th," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(623), S), pages 301-324, Summer.
    7. Chowdhury, Shyamal & Smits, Joeri & Sun, Qigang, 2020. "Contract Structure, Time Preference, and Technology Adoption," IZA Discussion Papers 13590, Institute of Labor Economics (IZA).
    8. Evan Borkum & Anitha Sivasankaran & Elena Moroz & Matt Sloan, "undated". "Evaluation of the Fruit Tree Productivity Project in Morocco: Final Report on the Catalyst Fund Activity," Mathematica Policy Research Reports d90e0c50304f4a71bb747d9ca, Mathematica Policy Research.
    9. Bonjean, Isabelle, 2019. "Heterogeneous incentives for innovation adoption: The price effect on segmented markets," Food Policy, Elsevier, vol. 87(C), pages 1-1.

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