One of the most common policy obstacles in the global effort against poverty is what is termed as "urban bias" where rural residents, who constitute majority of the poor in the world, face systematic bias against their economic interests by their own governments. This paper develops a simple political economy model of urban bias in dictatorial regimes. Equilibrium outcomes relating policy outcomes with economic structure, political power, and other behavioral and structural variables are analyzed. The model shows that anti-agricultural biases can emerge in primarily agrarian societies even if there is no bias in political power between urban and rural citizens. Evidence from recent World Bank country level panel data on biases against/for agriculture provides support for the model's prediction.
The role of agricultural development for industrialization is central to several theories of economic development and policy. However, empirically assessing the impact of agricultural growth on manufacturing growth is challenging because of endogeneity concerns. To address the identification challenge, I use random weather variations to instrument agricultural growth. The instrumental variable estimations show that agricultural growth has a significant positive impact on manufacturing growth. I discuss the empirical implications for efficiency of the manufacturing sector and the role of agriculture in Africa's industrialization.
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