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Geographic Poverty Traps?

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  • Jyotsna Jalan
  • Martin Ravallion

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.

Suggested Citation

  • Jyotsna Jalan & Martin Ravallion, 1998. "Geographic Poverty Traps?," Boston University - Institute for Economic Development 86, Boston University, Institute for Economic Development.
  • Handle: RePEc:fth:bosecd:86
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    References listed on IDEAS

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    1. Krugman, Paul, 1988. "Financing vs. forgiving a debt overhang," Journal of Development Economics, Elsevier, vol. 29(3), pages 253-268, November.
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    4. Jonathan Eaton & Mark Gersovitz & Joseph E. Stiglitz, 1991. "The Pure Theory of Country Risk," NBER Chapters,in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 391-435 National Bureau of Economic Research, Inc.
    5. Kletzer, Kenneth M, 1984. "Asymmetries of Information and LDC Borrowing with Sovereign Risk," Economic Journal, Royal Economic Society, vol. 94(374), pages 287-307, June.
    6. Diwan, Ishac & Demirguc-Kunt, Asli, 1990. "The menu approach to developing country external debt : an analysis of commercial banks'choice behavior," Policy Research Working Paper Series 530, The World Bank.
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