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Physical Capital Formation And Income Relationships: A Temporal Analysis For Punjab And Haryana

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  • Sethi, Amarjit Singh

    ()
    (Punjab School of Economics)

  • Kaur, Supreet

    (Punjab School of Economics)

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    Abstract

    The present paper aims at examining comparative growth performance, structural transformations and causal relationships among Physical Capital Formation and Gross State Domestic Product in Punjab and Haryana states. Various analytical estimations have been made from secondary time series data for 30 years (from 1980-81 through 2009-10), compiled on aggregated/ disaggregated gross capital formation and domestic product in respect of the two states. As per the findings, aggregated capital formation has undergone deceleration (particularly during pre-liberalisation period) in Punjab, while acceleration in Haryana state, primarily due to the corresponding pattern in the assets like Plant & Machinery and Transport Equipment. Further, VECM-based causality analysis has indicated that income generation from Secondary sector was a pre-requisite for consolidation of transport infrastructure in both the states. However, the absence of causal linkage between physical capital formation and GSDP at the aggregated level in both the states suggests that something else (other than fixed investment), like human capital formation, productivity, economic and political environment, foreign investment etc., might be explaining economic growth in these states. Therefore, suitable policy measures may be required for raising productivity and diversifying economic base so as to achieve sustainable growth in the two states.

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    Bibliographic Info

    Article provided by JRDP in its journal Journal of Regional Development and Planning.

    Volume (Year): 2 (2013)
    Issue (Month): 2 ()
    Pages: 109-130

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    Handle: RePEc:ris:jrdpin:0017

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    Postal: Journal of Regional Development and Planning, c/o Rajarshi Majumder, University of Burdwan, Golapbag, Burdwan, INDIA - 713104
    Web page: http://www.jrdp.in

    Related research

    Keywords: Physical Capital; Infrastructure; Fixed Capital Formation; Punjab; Haryana; India; Growth;

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    1. Blomström, Magnus & Lipsey, Robert E & Zejan, Mario, 1993. "Is Fixed Investment the Key to Economic Growth?," CEPR Discussion Papers 870, C.E.P.R. Discussion Papers.
    2. João Paulo Bento, 2011. "Energy Savings via Foreign Direct Investment? - Empirical evidence from Portugal," Working Papers 2011/24, Maastricht School of Management.
    3. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    4. Duo Qin & Marie Anne Cagas & Pilipinas Quising & Xin-Hua He, 2005. "How Much Does Investment Drive Economic Growth in China?," Working Papers 545, Queen Mary, University of London, School of Economics and Finance.
    5. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
    6. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    7. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
    8. Chung, Young-Iob, 2007. "South Korea in the Fast Lane: Economic Development and Capital Formation," OUP Catalogue, Oxford University Press, number 9780195325454, September.
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