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Do Cows Have Negative Returns? The Evidence Revisited

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  • Esther Gehrke
  • Michael Grimm

Abstract

This paper addresses the apparent paradox between widespread support of cattle farming through agricultural policy interventions and negative returns to cattle, as stressed in recent works. Using a representative panel data set for Andhra Pradesh, India, we explore the average and marginal profitability of holding cattle. We find that cattle farming might well generate positive returns, but most households seem to operate at unprofitable levels. Our results suggest that cattle farming is associated with sizable nonconvexities in the production technology and that substantial economies of scale, as well as high up-front expenses of acquiring high-productivity animals, might trap poorer households in low-productivity asset levels.

Suggested Citation

  • Esther Gehrke & Michael Grimm, 2018. "Do Cows Have Negative Returns? The Evidence Revisited," Economic Development and Cultural Change, University of Chicago Press, vol. 66(4), pages 673-707.
  • Handle: RePEc:ucp:ecdecc:doi:10.1086/697414
    DOI: 10.1086/697414
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    10. Dodlova, Marina & Göbel, Kristin & Grimm, Michael & Lay, Jann, 2015. "Constrained firms, not subsistence activities: Evidence on capital returns and accumulation in Peruvian microenterprises," Labour Economics, Elsevier, vol. 33(C), pages 94-110.
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    12. Fafchamps, Marcel & McKenzie, David & Quinn, Simon & Woodruff, Christopher, 2014. "Microenterprise growth and the flypaper effect: Evidence from a randomized experiment in Ghana," Journal of Development Economics, Elsevier, vol. 106(C), pages 211-226.
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    Cited by:

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    3. Olivia Bertelli, 2019. "Investing in agriculture when it is worth it. Evidence from rural Uganda," Working Papers DT/2019/05, DIAL (Développement, Institutions et Mondialisation).
    4. Muscillo, Alessio & Pin, Paolo & Razzolini, Tiziano & Serti, Francesco, 2018. "Does "Network Closure" Beef up Import Premium?," IZA Discussion Papers 12036, Institute of Labor Economics (IZA).
    5. Anagol, Santosh, 2017. "Adverse selection in asset markets: Theory and evidence from the Indian market for cows," Journal of Development Economics, Elsevier, vol. 129(C), pages 58-72.

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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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