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Does Urbanization Affect Rural Poverty? Evidence from Indian Districts

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  • Massimiliano Calì
  • Carlo Menon

Abstract

Although a high rate of urbanization and a high incidence of rural poverty are two distinct features of many developing countries, there is little knowledge of the effects of the former on the latter. Using a large sample of Indian districts from the 1983–1999 period, we find that urbanization has a substantial and systematic poverty-reducing effect in the surrounding rural areas. The results obtained through an instrumental variable estimation suggest that this effect is causal in nature and is largely attributable to the positive spillovers of urbanization on the rural economy rather than to the movement of the rural poor to urban areas. This rural poverty-reducing effect of urbanization is primarily explained by increased demand for local agricultural products and, to a lesser extent, by urban-rural remittances, the rural land/population ratio, and rural nonfarm employment. Copyright 2013, Oxford University Press.

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  • Massimiliano Calì & Carlo Menon, 2013. "Does Urbanization Affect Rural Poverty? Evidence from Indian Districts," World Bank Economic Review, World Bank Group, vol. 27(2), pages 171-201.
  • Handle: RePEc:oup:wbecrv:v:27:y:2013:i:2:p:171-201
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    2. Lara Cockx & Liesbeth Colen & Joachim De Weerdt & Sergio Gomez Y Paloma, 2019. "Urbanization as a driver of changing food demand in Africa: Evidence from rural-urban migration in Tanzania," JRC Working Papers JRC107918, Joint Research Centre (Seville site).
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    5. Imai, Katsushi S. & Gaiha, Raghav & Garbero, Alessandra, 2017. "Poverty reduction during the rural–urban transformation: Rural development is still more important than urbanisation," Journal of Policy Modeling, Elsevier, vol. 39(6), pages 963-982.
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    7. Ghani, Ejaz & Goswami, Arti Grover & Kerr, William R., 2012. "Is India's manufacturing sector moving away from cities ?," Policy Research Working Paper Series 6271, The World Bank.
    8. Juan Mauricio Ramírez & Juan Guillermo Bedoya & Yadira Díaz, 2016. "Geografía económica, descentralización y pobreza multidimensional en Colombia," Cuadernos de Fedesarrollo 014443, Fedesarrollo.
    9. Higashikata, Takayuki & Hashiguchi, Yoshihiro, 2017. "The causal effect of urbanization on rural poverty reduction: quasi-experimental evidence using Indonesian urban area data," IDE Discussion Papers 673, Institute of Developing Economies, Japan External Trade Organization(JETRO).
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    11. Arouri, Mohamed & Ben Youssef, Adel & Nguyen, Cuong, 2017. "Does urbanization reduce rural poverty? Evidence from Vietnam," Economic Modelling, Elsevier, vol. 60(C), pages 253-270.
    12. Luc Christiaensen & Joachim Weerdt & Yasuyuki Todo, 2013. "Urbanization and poverty reduction: the role of rural diversification and secondary towns," Agricultural Economics, International Association of Agricultural Economists, vol. 44(4-5), pages 435-447, July.
    13. Christiaensen, Luc & Todo, Yasuyuki, 2014. "Poverty Reduction During the Rural–Urban Transformation – The Role of the Missing Middle," World Development, Elsevier, vol. 63(C), pages 43-58.
    14. Vandercasteelen, Joachim & Beyene, Seneshaw Tambru & Minten, Bart & Swinnen, Johan, 2018. "Big cities, small towns, and poor farmers: Evidence from Ethiopia," World Development, Elsevier, vol. 106(C), pages 393-406.
    15. Joachim Vandercasteelen & Seneshaw Tamru & Bart Minten & Johan Swinnen, 2017. "Secondary towns, agricultural prices, and intensification: Evidence from Ethiopia," LICOS Discussion Papers 39317, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    16. Juan Mauricio Ramírez & Yadira Díaz & Juan Guillermo Bedoya, 2014. "Decentralization in Colombia: searching for social equity in a bumpy economic geography," Working Papers Series. Documentos de Trabajo 011557, Fedesarrollo.
    17. Das, Samarjit & Ghate, Chetan & Robertson, Peter E., 2015. "Remoteness, Urbanization, and India’s Unbalanced Growth," World Development, Elsevier, vol. 66(C), pages 572-587.
    18. Ping Gao & Shenghe Liu & Wei Qi & Honggang Qi, 2020. "The Nexus between Poverty and the Environment: A Case Study of Lijiang, China," Sustainability, MDPI, Open Access Journal, vol. 12(3), pages 1-17, February.
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    22. Juan Mauricio Ramírez & Juan Guillermo Bedoya & Yadira Díaz, 2014. "Convergencia social en Colombia: el rol de la geografía económica y de la descentralización," Informes de Investigación 012499, Fedesarrollo.
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    24. Braja Bandhu Swain & Nils Teufel, 2017. "The impact of urbanisation on crop–livestock farming system: a comparative case study of India and Bangladesh," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 19(1), pages 161-180, April.
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