Access to Markets and Household Consumption: Evidence from Rural China
41 Pages Posted: 10 Jul 2008
Date Written: July 10, 2008
This paper presents evidence on the effects of access to domestic and international markets on per capita consumption of households using data from rural China. The econometric analysis uses alternative identification schemes to address the potential endogeneity of access to markets. Motivated by the transport engineering literature, we exploit topography of the other counties along the linear distances to the markets as the source of exogeneous variations. We also use identification through heteroskedasticity which does not rely on any exclusion restrictions. The results from alternative identification schemes show that (i) better access to both domestic and international markets has positive effects on per capita consumption, (ii) the domestic market effect is significantly larger in magnitude and (iii) there is complementarity between the access to domestic and international markets.
Keywords: Access to Markets, Household Consumption, Domestic Market, International Market, Rural Poverty, China
JEL Classification: O12, O16
Suggested Citation: Suggested Citation