Geographic poverty traps? A micro model of consumption growth in rural China
✍ Scribed by Jyotsna Jalan; Martin Ravallion
- Publisher
- John Wiley and Sons
- Year
- 2002
- Tongue
- English
- Weight
- 533 KB
- Volume
- 17
- Category
- Article
- ISSN
- 0883-7252
- DOI
- 10.1002/jae.645
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✦ Synopsis
Abstract
How important are neighbourhood endowments of physical and human capital in explaining diverging fortunes over time for otherwise identical households in a developing rural economy? 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. Our statistical test has considerable power in detecting geographic effects given that we control for latent heterogeneity in measured consumption growth rates at the micro level. We find robust evidence of geographic poverty traps in farm‐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. Copyright © 2002 John Wiley & Sons, Ltd.