Agrarian Distress under Global Integration: Impoverishing Growth and “Perverse” Supply Response

J. Mohan Rao and Vamsi Vakulabharanam

QA - Rivista dell'Associazione Rossi-Doria, 2009, issue 3

Abstract: This paper aims to explain theoretically two apparently paradoxical phenomena witnessed in the Telangana region of South India between 1985 and 2000. First, despite the rapid growth of real agricultural output during this period, per-capita consumption of the majority of the agricultural population declined during the 1990s (when agricultural liberalization policies were introduced in India) after steadily rising during the 1980s. Second, non-food crop supply elasticities, which had been positive, turned "perversely" negative during the 1990s. Employing a model of a peasant economy with an effort supply function originally proposed by Leibenstein, we explain the two puzzles in terms of the interplay between the conditions of global integration (falling value-added prices) and the nature of local credit markets and institutions (including the practice of requiring collateral in the form of non-food crops).

Keywords: Capitalist Systems; Political Economy; Economic Development; Economic Integration; Sustainable Development (search for similar items in EconPapers)
JEL-codes: P16 O10 F15 Q10 (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:rar:journl:0115

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