Rural poverty and aggregate agricultural performance in post-independence India
Bell, C.; Rich, R.
Oxford Bulletin of Economics and Statistics 56(2): 111-133
1994
ISSN/ISBN: 0305-9049 DOI: 10.1111/j.1468-0084.1994.mp56002001.xDocument Number: 299858
The analysis seeks to improve on earlier studies of the movements in and determinants of rural poverty in India in three ways. First, it uses new data series, which span a longer period than the data collected during the 1951-74 household expenditure surveys, the source for most previous studies, and purges them of certain kinds of mismeasurements. It analyses the autocorrelations in the poverty and output series and, in so doing, identifies certain dynamic properties of these series and their implications for the specification of the econometric models, an analysis considered to have been conspicuously absent from earlier studies. Thirdly, the potential endogeneity of real output and the effects of unanticipated inflation on poverty are addressed in a unified econometric framework, in which estimation using the generalized method of moments procedure deals not only with simultaneity bias, but also yields both specification tests and heteroskedasticity-consistent estimates of the standard errors. For the period 1951/52-1977/78, over which the poverty series is largely complete, the series for both poverty and real output per head are found to be stationary with relatively short cycles. There is strong statistical support for the hypothesis that in India's substantially closed economy, there should be more poverty in lean years than in those of good harvests. The estimated short-run elasticity of the headcount ratio with respect to real agricultural output per head ranges from about -0.4 to -0.8. No support is found for the hypothesis that, after controlling for movements in real output per head, there was an underlying upward trend in the extent of poverty. When later data (up to 1988/89) are added, evidence emerges of a structural break after the mid-1970s, with declining poverty and rising real agricultural output per head.