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Industrial Location and Spatial Inequality: Theory and Evidence from India

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Author Info
Somik Vinay Lall
Sanjoy Chakravorty

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Abstract

The authors argue that spatial inequality of industry location is a primary cause of spatial income inequality in developing nations. Their study focuses on understanding the process of spatial industrial variation: identifying the spatial factors that have cost implications for firms, and the factors that influence the location decisions of new industrial units. The analysis has two parts. First the authors examine the contribution of economic geography factors to the cost structure of firms in eight industry sectors and show that local industrial diversity is the one factor with significant and substantial cost-reducing effects. They then show that new private sector industrial investments in India are biased toward existing industrial and coastal districts, whereas state industrial investments (in deep decline after structural reforms) are far less biased toward such districts. The authors conclude that structural reforms lead to increased spatial inequality in industrialization, and therefore, income. Copyright United Nations University 2005.

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Article provided by Blackwell Publishing in its journal Review of Development Economics.

Volume (Year): 9 (2005)
Issue (Month): 1 (02)
Pages: 47-68
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Handle: RePEc:bla:rdevec:v:9:y:2005:i:1:p:47-68

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Fujita, Masahisa & Thisse, Jacques-Francois, 1996. "Economics of Agglomeration," Journal of the Japanese and International Economies, Elsevier, vol. 10(4), pages 339-378, December. [Downloadable!] (restricted)
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  2. Simon J. Evenett & Wolfgang Keller, 2002. "On Theories Explaining the Success of the Gravity Equation," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 281-316, April. [Downloadable!] (restricted)
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  3. Lall, Somik V. & Shalizi, Zmarak & Deichmann, Uwe, 2004. "Agglomeration economies and productivity in Indian industry," Journal of Development Economics, Elsevier, vol. 73(2), pages 643-673, April. [Downloadable!] (restricted)
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  4. Sanjoy Chakravorty, 2003. "Capital source and the location of industrial investment: a tale of divergence from post-reform India," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(3), pages 365-383. [Downloadable!]
  5. Edward J. Feser, Edward M. Bergman, 2000. "National Industry Cluster Templates: A Framework for Applied Regional Cluster Analysis," Regional Studies, Taylor and Francis Journals, vol. 34(1), pages 1-19, February. [Downloadable!] (restricted)
  6. Hanushek, Eric A & Song, Byung Nak, 1978. "The Dynamics of Postwar Industrial Location," The Review of Economics and Statistics, MIT Press, vol. 60(4), pages 515-22, November. [Downloadable!] (restricted)
  7. Lall, Somik V. & Funderburg, Richard & Yepes, Tito, 2003. "Location, concentration, and performance of economic activity in Brazil," Policy Research Working Paper Series 3268, The World Bank. [Downloadable!]
  8. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June. [Downloadable!] (restricted)
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Cited by:
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  1. Chaudhuri, Shubham & Ravallion, Martin, 2006. "Partially awakened giants : uneven growth in China and India," Policy Research Working Paper Series 4069, The World Bank. [Downloadable!]
  2. Lall, Somik V. & Mengistae, Taye, 2005. "Business environment, clustering, and industry location : evidence from Indian cities," Policy Research Working Paper Series 3675, The World Bank. [Downloadable!]
  3. Ravi Kanbur, 2005. "Spatial Inequality and Development: Overview of UNU-WIDER Project," Working Papers id:215, esocialsciences.com. [Downloadable!]
  4. Sumon Kumar Bhaumik & Shubhashis Gangopadhyay & Shagun Krishnan, 2006. "Reforms, Entry and Productivity: Some Evidence from the Indian Manufacturing Sector," IZA Discussion Papers 2086, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  5. Bhaumik, Sumon K. & Kumbhakar, Subal C., 2008. "Impact of Reforms on Plant-Level Productivity and Technical Efficiency: Evidence from the Indian Manufacturing Sector," IZA Discussion Papers 3347, Institute for the Study of Labor (IZA). [Downloadable!]
  6. Brata, Aloysius Gunadi, 2009. "Does Geographic Factors Determine Local Economic Development?," MPRA Paper 15817, University Library of Munich, Germany. [Downloadable!]
  7. Lall, Somik V. & Mengistae, Taye, 2005. "The impact of business environment and economic geography on plant-level productivity : an analysis of Indian industry," Policy Research Working Paper Series 3664, The World Bank. [Downloadable!]
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