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Governance and Rural Public Expenditures in Latin America. The Impact on Rural Development

  • Gustavo Anríquez

    (Agricultural and Development Economics Division, Food and Agriculture Organization)

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    In this paper we examine the effects of the composition (between private and public goods) of government expenditures in the rural world, and the effect that corruption has in the political game that determines these allocation decisions. In the first section of this paper we develop a political economy model where corruption and trade openness counteract to determine, within a political equilibrium, the amount of public funds to be devoted to the rural world, and their composition between public and private goods. In the second section we contrast the implications of the political economy model with recently released data on rural public expenditures in Latin America. We find that corruption reduces the amount of public funds that reach the rural world, but not its composition. We also find that after accounting for the endogeneity of public expenditure decisions, the composition of these expenditures significantly determines rural development (as proxied by agricultural GDP).

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    File URL: ftp://ftp.fao.org/docrep/fao/010/ah857e/ah857e.pdf
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    Paper provided by Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA) in its series Working Papers with number 07-01.

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    Length: 45 pages
    Date of creation: 2007
    Date of revision:
    Handle: RePEc:fao:wpaper:0701
    Contact details of provider: Postal: Agricultural Sector in Economic Development Service FAO Viale delle Terme di Caracalla 00153 Rome Italy
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    1. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2002. "Instrumental variables and GMM: Estimation and testing," United Kingdom Stata Users' Group Meetings 2003 02, Stata Users Group.
    2. Fan, Shenggen & Chan-Kang, Connie & Mukherjee, Anit, 2005. "Rural and urban dynamics and poverty: Evidence from China and India," FCND discussion papers 196, International Food Policy Research Institute (IFPRI).
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