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Heterogeneity in the Returns to Investment in Poor Villages

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  • Chikako Yamauchi

Abstract

Under Indonesia's anti-poverty program, IDT, the government provided selected poor villages with grants of the same value, regardless of population size. Exploiting the variation in per household grant value that is caused by this program design, I estimate the returns to public grants, which are designated for investment loans. Results show that the returns are heterogeneous. Villages with pre-existing market facilities demonstrate increases in male labor supply, per capita income (PCI) and per capita expenditure (PCE). However, villages not accessible by land exhibit few changes in labor supply or PCI and yet an increase in PCE, particularly on festivals. These results suggest that the returns to investment capital are limited without a basic economic infrastructure.

Suggested Citation

  • Chikako Yamauchi, 2008. "Heterogeneity in the Returns to Investment in Poor Villages," CEPR Discussion Papers 582, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  • Handle: RePEc:auu:dpaper:582
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    File URL: https://www.cbe.anu.edu.au/researchpapers/cepr/DP582.pdf
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    References listed on IDEAS

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    Cited by:

    1. Joseph P. Kaboski & Robert M. Townsend, 2012. "The Impact of Credit on Village Economies," American Economic Journal: Applied Economics, American Economic Association, vol. 4(2), pages 98-133, April.

    More about this item

    Keywords

    poverty; labor supply; investment; IDT; Indonesia;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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