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Finance and hunger : empirical evidence of the agricultural productivity channel

  • Claessens, Stijn
  • Feijen, Erik

Using cross-country and panel regressions, the authors show that financial sector development significantly reduces undernourishment (hunger), largely through gaining farmers and others access to productivity-enhancing equipment, translating into beneficial income and general effects. They show specifically that a deeper financial sector leads to higher agricultural productivity, including higher cereal yields, through increased fertilizer and tractor use. Higher productivity in turn leads to lower undernourishment. The results are robust to various specifications and econometric tests and imply that a 1 percentage point increase in private credit to GDP reduces undernourishment by 0.22-2.45 percentage points, or about one-quarter the impact of GDP per capita.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4080.

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Date of creation: 01 Dec 2006
Date of revision:
Handle: RePEc:wbk:wbrwps:4080
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  1. Greenwood, Jeremy & Jovanovic, Boyan, 1990. "Financial Development, Growth, and the Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1076-1107, October.
  2. Timothy Besley & Robin Burgess, 2003. "Halving Global Poverty," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 3-22, Summer.
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  4. Honohan, Patrick, 2006. "Household financial assets in the process of development," Policy Research Working Paper Series 3965, The World Bank.
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  10. Honohan, Patrick, 2005. "Measuring microfinance access : building on existing cross-country data," Policy Research Working Paper Series 3606, The World Bank.
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  12. Dollar, David & Kraay, Aart, 2001. "Growth is good for the poor," Policy Research Working Paper Series 2587, The World Bank.
  13. Beck, Thorsten & Demirguc-Kunt, Asli & Martinez Peria, Maria Soledad, 2007. "Reaching out: Access to and use of banking services across countries," Journal of Financial Economics, Elsevier, vol. 85(1), pages 234-266, July.
  14. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
  15. Patrick Honohan, 2004. "Financial development, growth, and poverty: how close are the links?," Policy Research Working Paper Series 3203, The World Bank.
  16. RAFAEL LaPORTA & FLORENCIO LOPEZ-de-SILANES & ANDREI SHLEIFER & ROBERT W. VISHNY, . "Legal Determinants of External Finance,"," CRSP working papers 324, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  17. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 717-37, August.
  18. Aghion, Philippe & Bolton, Patrick, 1997. "A Theory of Trickle-Down Growth and Development," Review of Economic Studies, Wiley Blackwell, vol. 64(2), pages 151-72, April.
  19. Patrick Honohan, 2004. "Financial Sector Policy and the Poor : Selected Findings and Issues," World Bank Publications, The World Bank, number 14874, September.
  20. Ross Levine, 2004. "Finance and Growth: Theory and Evidence," NBER Working Papers 10766, National Bureau of Economic Research, Inc.
  21. Dean Karlan & Xavier Gine & Jonathan Morduch & Pamela Jakiela, 2006. "Microfinance Games," Working Papers 936, Economic Growth Center, Yale University.
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