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Agrarian Distress under Global Integration: Impoverishing Growth and “Perverse” Supply Response

  • J. Mohan Rao
  • Vamsi Vakulabharanam
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    This paper aims to explain theoretically two apparently paradoxical phenomena witnessed in the Telangana region of South India between 1985 and 2000. First, despite the rapid growth of real agricultural output during this period, per-capita consumption of the majority of the agricultural population declined during the 1990s (when agricultural liberalization policies were introduced in India) after steadily rising during the 1980s. Second, non-food crop supply elasticities, which had been positive, turned "perversely" negative during the 1990s. Employing a model of a peasant economy with an effort supply function originally proposed by Leibenstein, we explain the two puzzles in terms of the interplay between the conditions of global integration (falling value-added prices) and the nature of local credit markets and institutions (including the practice of requiring collateral in the form of non-food crops).

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    Article provided by Associazione Rossi Doria in its journal QA.

    Volume (Year): (2009)
    Issue (Month): 3 (August)
    Pages:

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    Handle: RePEc:rar:journl:0115
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    1. Adam Ozanne, 1999. "Perverse supply response in peasant agriculture: A review," Oxford Development Studies, Taylor & Francis Journals, vol. 27(2), pages 251-270.
    2. Just, Richard E & Zilberman, David, 1986. "Does the Law of Supply Hold under Uncertainty?," Economic Journal, Royal Economic Society, vol. 96(382), pages 514-24, June.
    3. Rao, J. Mohan, 1989. "Agricultural supply response: A survey," Agricultural Economics, Blackwell, vol. 3(1), pages 1-22, March.
    4. Rao, J. Mohan, 1989. "Agricultural Supply Response: A Survey," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 3(1), March.
    5. Maurice Schiff & Alberto Valdes, 1994. "The Plundering of Agriculture in Developing Countries," Reports _013, World Bank Latin America and the Caribean Region Department.
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