Why have some Indian states done better than others at reducing rural poverty?
The unevenness of the rise in rural living standards in the various states of India since the 1950s allowed the authors to study the causes of poverty. They modeled the evolution of average consumption and various poverty measures using pooled state-level data for 1957-91. They found that poverty was reduced by higher agricultural yields, above-trend growth in nonfarm output, and lower inflation rates. But these factors only partly explain relative success and failure in reducing poverty. Initial conditions also mattered. States that started the period with better infrastructure and human resources - with more intense irrigation, greater literacy, and lower infant mortality rates - had significantly greater long-term rates of consumption growth and poverty reduction. By and large, the same variables that promoted growth in average consumption also helped reduce poverty. The effects on poverty measures were partly redistributive in nature. After controlling for inflation, the authors found that some of the factors that helped reduce absolute poverty also improved distribution, and none of the factors that reduced absolute poverty had adverse impacts on distribution. In other words, there was no sign of tradeoffs between growth and pro-poor distribution.
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