Price and Non-Price Determinants of Rural Poverty

Price and Non-Price Determinants of Rural Poverty V N Misra Introduction IT is argued here that the impact of relative prices on rural poverty became non-significant in the recent article by B M Desai and N V Namboodiri (hereafter as DN) (1998b) probably because it is being included in the equation along with the consumer price index numbers of agricultural labours (CPIAL) measuring thereby the inflation in explaining the changes in rural poverty during the period 1961-62 to 1993-94. Similarly, the explanation for significantly negative coefficient for the distribution in ownership of landholdings is rather misplaced, because it did not change during the last two decades. It seems to have been influenced by other factors included in the equation. Further, it is difficult to rely on the ranking among variables based on standardised coefficients due to the non-inclusion of the most important variable like real agricultural wages capturing the impact of rural labour market on rural poverty in the explanatory framework. As a result, the various tradeoffs regarding policy issues based on the coefficients are likely to change if the real agricultural wage is included in the equation. Therefore, for various policy issues, the study of DN is much to be desired. The rationale for these comments would be evident from the following discussions on their findings.