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Title: The agricultural roots of industrial development: rural savings and industrialisation in reform era China
Citation Type: Miscellaneous
Publication Year: 2017
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Abstract: Improvements in agricultural productivity are often claimed to aid industrialisation at low levels of development. However, empirical evidence for this is limited. This paper uses a natural experiment to show that Chinas 1978 to 1984 agricultural reforms promoted industrial development by increasing the supply of capital. Variation in agricultural productivity comes from the fact that the reforms liberalised the planting of cash crops. Counties with land agro-climatically suited to those crops thus benefitted more from the reforms. Frictions in Chinese capital markets meant that rural savings were often invested locally. Consistent with a simple two-sector model linking the agricultural and non-agricultural sectors through the supply of capital, counties benefitting more from the reforms had faster post reform growth in savings, investment and non-agricultural output. Data from the 1995 industrial census also indicates that firms in these areas faced relatively low capital costs. Additional results indicate linkages through other channels cannot explain the growth in non-agricultural output. The results of this paper thus suggest that agricultural surpluses can provide an important source of capital for low income countries.
Url: http://www.samuelmarden.com/uploads/2/4/2/8/24285916/forwardlinkages3.pdf
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Authors: Marden, Samuel
Publisher: University of Sussex
Data Collections: IPUMS CPS
Topics: Labor Force and Occupational Structure, Land Use/Urban Organization, Natural Resource Management, Other
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