WHY HAVE SOME INDIAN STATES DONE BETTER THAN OTHERS AT REDUCING RURALPOVERTY

Rural poverty rankings of Indian states in 1990 were very different fr om those of 1960. This unevenness in progress allows us to study the c auses of poverty in a developing rural economy. We model the evolution of various poverty measures using pooled state-level data for the per iod 1957-91. Differences in trend rates of poverty reduction are attri buted to differing growth rates of farm yield per acre and differing i nitial conditions; states starting with better infrastructure and huma n resources saw significantly higher long-term rates of poverty reduct ion. Deviations from trend are attributed to inflation (which hurt the poor in the short term) and shocks to farm and non-farm output.