When Does Growth Trickle Down to the Poor? The Indian Case
Posted: 20 Jun 2008
Date Written: May 2008
A theoretical analysis and several econometric tests have been undertaken to examine whether the trickle down effect took place in rural India over a long time period. We found little evidence to suggest that the trickle down effect had occurred at all; our analysis suggests that the emergence of capital-labour substitution was primarily responsible for preventing growth from reducing poverty. The decline in poverty and a higher growth rate that took place during the late 1970s and 1980s were largely a result of government anti-poverty measures teamed with the more equitable distribution of credit and inputs to smaller and marginal farmers.
Keywords: Trickle down effect, Rural poverty, Economic growth, Capital formation
JEL Classification: O1
Suggested Citation: Suggested Citation