Food demand, uncertainty and investments in human capital: three essays on rural Andhra Pradesh, India

Abstract

This dissertation provides some explanations of the causes of poverty in rural India, by investigating poverty determinants that are too often neglected in the literature and in policy debates. It proceeds in three main chapters, each addressing a specific research question. The first chapter focuses on the process of agricultural transformation in the state of Andhra Pradesh. In the early stages of economic development, all countries undergo a process of transformation of their production and employment structure. As a result, agricultural output as a share of total GDP decreases, as does rural employment as a share of total employment. Over the last 50 years, the share of agriculture in total output has considerably declined in Andhra Pradesh. However, the agricultural sector continues to employ the great majority of the labour force. The theoretical section of this chapter shows how structural change is affected by the characteristics of food demand and by income inequality. The empirical analysis, using novel semiparametric methods, estimates food Engel curves and food elasticities, which are used to simulate the effects on changes in income distribution on the composition of demand. The second chapter analyses the stabilising effect of irrigation on household expenditure. The expansion of irrigation infrastructure, together with the introduction of hybrid seeds and chemical fertilisers, was the most important technological advancement in Indian agriculture of the last 50 years. The positive impact of irrigation on income of rural households has been extensively documented, but its stabilising effect has been largely neglected. The first part of the chapter builds a theoretical model that establishes the causal links between access to irrigation, income stability, and consumption smoothing over the seasonal cycle. The empirical analysis assesses the stabilising impact of irrigation on expenditure using modern impact evaluation techniques. The findings indicate that consumption patterns of households with access to irrigation are more stable over the seasonal cycle and over the years. The third chapter studies the effect of income uncertainty on educational choices made by the rural poor. It investigates the demand side of education in order to understand why a large number of rural children do not enrol or complete primary education. The theoretical part of the chapter presents an inter-temporal consumption model that shows how the expectation of income variability negatively affects household expenditure on education. The empirical analysis uses a duration model with time covariates in order to estimate the determinants of child progress in school, and provides evidence that income variability negatively affects investments in education.