Chapter

Externalities in Rural Development: Evidence for China

Ravi Kanbur and Anthony J. Venables

in Spatial Inequality and Development

Published in print February 2005 | ISBN: 9780199278633
Published online April 2005 | e-ISBN: 9780191602191 | DOI: http://dx.doi.org/10.1093/0199278636.003.0007

Series: WIDER Studies in Development Economics

 Externalities in Rural Development: Evidence for China

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Tests for external effects of local economic activity on consumption and income growth at the farm household level using panel data from four provinces of post-reform rural China. The tests allow for non-stationary fixed effects in the consumption growth process. Evidence is found of geographic externalities, stemming from spill over effects of the level and composition of local economic activity and private returns to local human and physical infrastructure endowments. The results suggest an explanation for rural underdevelopment arising from underinvestment in certain externality-generating activities, of which agricultural development emerges as the most important.

Keywords: consumption growth; externalities; income growth; panel data; rural China

Chapter.  10024 words. 

Subjects: Economic Development and Growth

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