Journal
AMERICAN JOURNAL OF AGRICULTURAL ECONOMICS
Volume 82, Issue 4, Pages 1038-1051Publisher
BLACKWELL PUBLISHERS
DOI: 10.1111/0002-9092.00101
Keywords
public policy; government expenditure; rural poverty; productivity growth; India
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Using state-level data far 1970-93, a simultaneous equation model was developed to estimate the direct and indirect effects of different types of government expenditure on rural poverty and productivity growth in India. The results show that in order to reduce rural poverty, the Indian government should give highest priority to additional investments in rural roads and agricultural research. These types of investment not only have much larger poverty impacts per rupee spent than any other government investment, but also generate higher productivity growth. Apart from government spending on education, which has the third largest marginal impact on rural poverty and productivity growth, other investments (including irrigation, soil and water conservation, health, and rural and community development) have only modest impacts on growth and poverty per additional rupee spent.
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