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Geographic Poverty Traps?

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  • Jalan, Jyotsna
  • Ravallion, Martin

Abstract

How important are neighborhood endowments of physical and human capital in explaining diverging fortunes over time for otherwise identical households? To answer this question we develop an estimable micro model of consumption growth allowing for constraints on factor mobility and externalities, whereby geographic capital can influence the productivity of a household's own capital. Out statistical test has considerable power in detecting geographic effects given that we control for latent heterogeneity in measured consumption growth rates at micro level. We find robust evidence of geographic poverty traps in household panel data from post-reform rural China. Our results strengthen the equity and efficiency case for public investment in lagging poor areas in this setting.
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Suggested Citation

  • Jalan, Jyotsna & Ravallion, Martin, 1998. "Geographic Poverty Traps?," Institute for Economic Development 315949, Boston University.
    • Handle: RePEc:ags:bouied:315949
    DOI: 10.22004/ag.econ.315949
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Ravallion, Martin & Jalan, Jyotsna, 1996. "Growth divergence due to spatial externalities," Economics Letters, Elsevier, vol. 53(2), pages 227-232, November.
    3. Douglas Holtz-Eakin, 1986. "Testing for Individual Effects in Dynamic Models Using Panel Data," NBER Technical Working Papers 0057, National Bureau of Economic Research, Inc.
    4. Barro, Robert J & Mankiw, N Gregory & Sala-i-Martin, Xavier, 1995. "Capital Mobility in Neoclassical Models of Growth," American Economic Review, American Economic Association, vol. 85(1), pages 103-115, March.
    5. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-1395, November.
    6. Alok Bhargava & J. D. Sargan, 2006. "Estimating Dynamic Random Effects Models From Panel Data Covering Short Time Periods," World Scientific Book Chapters, in: Econometrics, Statistics And Computational Approaches In Food And Health Sciences, chapter 1, pages 3-27, World Scientific Publishing Co. Pte. Ltd..
    7. George J. Borjas, 2021. "Ethnicity, Neighborhoods, and Human-Capital Externalities," World Scientific Book Chapters, in: Foundational Essays in Immigration Economics, chapter 7, pages 135-160, World Scientific Publishing Co. Pte. Ltd..
    8. Knight, John & Song, Lina, 1993. "The Spatial Contribution to Income Inequality in Rural China," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 17(2), pages 195-213, June.
    9. Nazrul Islam, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(4), pages 1127-1170.
    10. Chen, Shaohua & Ravallion, Martin, 1996. "Data in transition: Assessing rural living standards in Southern China," China Economic Review, Elsevier, vol. 7(1), pages 23-56.
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