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Agricultural Growth, Employment and Poverty: Theoretical and Empirical Explorations with Indian data (1970-1993)

There is a rapidly growing literature on the dual concern of promoting agricultural growth and reducing the incidence of rural poverty. However the analysis of the interaction of growth and poverty is an under researched area of economic policy. This paper attempts to further analyse these dual concerns in an integrated manner. A basic endogenous growth model is developed which explicitly includes poor households and a government that has to decide how to allocate resources to the provision of infrastructure and to the public distribution of food grains. The intertemporal maximisation clearly shows the trade-off the government is facing and the indeterminate outcome. The model derives five key relationships: an agricultural metaproduction function (which allows differing temporal and spatial technical progress), rural employment and wage functions, and relationships for the public distribution of food grains and for rural poverty. These structural equations are estimated in a simultaneous setting for fifteen Indian states using eleven years of data for the period 1970 to 1993. Care is taken in the treatment of missing values, the non-stationarity of many of the state variables, the high level of dependencies between the variables (in the form of extreme multicollinearity and endogeneity) and the presence of structural change. We believe that insufficient care has been taken with these important complications in some studies. Robust structural form, net average elasticities and reduced form impact elasticity multipliers are derived. These estimates give valuable insights into the complicated interdependencies of the policy and endogenous variables. Whilst our broad conclusions tend to reinforce the findings of recent studies there are major differences in our estimates and methodology, which includes the conceptualisation, analytic specification and application of appropriate estimation techniques.

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File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/doc/uow012098.pdf
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Paper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp00-06.

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Length: 57 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:uow:depec1:wp00-06
Contact details of provider: Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
Phone: +612 4221-3659
Fax: +612 4221-3725
Web page: http://business.uow.edu.au/econ/index.html

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  1. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
  2. Lau, Lawrence J. & Yotopoulos, Pan A., 1989. "The meta-production function approach to technological change in world agriculture," Journal of Development Economics, Elsevier, vol. 31(2), pages 241-269, October.
  3. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
  4. Kuznets, Simon, 1973. "Modern Economic Growth: Findings and Reflections," American Economic Review, American Economic Association, vol. 63(3), pages 247-58, June.
  5. Xavier Sala-i-Martin, 1990. "Lecture Notes on Economic Growth(II): Five Prototype Models of Endogenous Growth," NBER Working Papers 3564, National Bureau of Economic Research, Inc.
  6. Xavier Sala-i-Martin, 1994. "Lecture notes on economic growth (I): Introduction to the literature and Neoclassical models," Economics Working Papers 77, Department of Economics and Business, Universitat Pompeu Fabra.
  7. Barro, R.J., 1988. "Government Spending In A Simple Model Of Endogenous Growth," RCER Working Papers 130, University of Rochester - Center for Economic Research (RCER).
  8. Howard Pack, 1994. "Endogenous Growth Theory: Intellectual Appeal and Empirical Shortcomings," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 55-72, Winter.
  9. World Bank, 2000. "India : Policies to Reduce Poverty and Accelerate Sustainable Development," World Bank Other Operational Studies 15106, The World Bank.
  10. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
  11. Quah, Danny, 1993. "Empirical cross-section dynamics in economic growth," European Economic Review, Elsevier, vol. 37(2-3), pages 426-434, April.
  12. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  13. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  14. Ram, Rati, 1986. "Government Size and Economic Growth: A New Framework and Some Evidencefrom Cross-Section and Time-Series Data," American Economic Review, American Economic Association, vol. 76(1), pages 191-203, March.
  15. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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