Industry and the Urge to Cluster: A Study of the Informal Sector in India
AbstractThis paper studies the determinants of firm location choice at the district-level in India to gauge the relative importance of agglomeration economies vis-à-vis good business environment. A peculiar characteristic of the Indian economy is that the unorganised nonfarm sector accounts for 43.2% of NDP and employs 71.6% of the total workforce. I analyse National Sample Survey data that covers over 4.4 million firms, in both unorganised sectors - manufacturing and services. The empirical analysis is carried out using count models, and I instrument with land revenue institutions to deal with possible endogeneity bias. I find that buyer-suppler linkages and industrial diversity make a district more attractive to economic activity, whilst the quality and level of infrastructure are also important. I conclude that public policy may be limited in its ability to encourage relocation of informal firms.
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Bibliographic InfoPaper provided by Spatial Economics Research Centre, LSE in its series SERC Discussion Papers with number 0072.
Date of creation: Mar 2011
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Agglomeration economies; informal sector; location choice;
Find related papers by JEL classification:
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
- R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Production Analysis, and Firm Location
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-26 (All new papers)
- NEP-CSE-2011-03-26 (Economics of Strategic Management)
- NEP-DEV-2011-03-26 (Development)
- NEP-GEO-2011-03-26 (Economic Geography)
- NEP-URE-2011-03-26 (Urban & Real Estate Economics)
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- Ghani, Ejaz & Kerr, William R. & O'Connell, Stephen D., 2013. "The exceptional persistence of India's unorganized sector," Policy Research Working Paper Series 6454, The World Bank.
- Ejaz Ghani & Arti Grover Goswami & William R. Kerr, 2012.
"Is India's Manufacturing Sector Moving Away From Cities?,"
NBER Working Papers
17992, National Bureau of Economic Research, Inc.
- Ghani, Ejaz & Goswami, Arti Grover & Kerr, William R., 2012. "Is India's manufacturing sector moving away from cities ?," Policy Research Working Paper Series 6271, The World Bank.
- Ejaz Ghani & Arti Grover Goswami & William R. Kerr, 2012. "Is India’s Manufacturing Sector Moving Away From Cities?," Harvard Business School Working Papers 12-090, Harvard Business School.
- Ghani, Ejaz & Kerr, William R. & O'Connell, Stephen D., 2013. "Female business ownership and informal sector persistence," Policy Research Working Paper Series 6612, The World Bank.
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- Ghani, Ejaz & Kanbur, Ravi & O'Connell, Stephen D., 2013. "Urbanization and agglomeration benefits : gender differentiated impacts on enterprise creation in India's informal sector," Policy Research Working Paper Series 6553, The World Bank.
- Ghani, Ejaz & Kerr, William R. & O'Connell, Stephen D., 2013. "Political reservations and women's entrepreneurship in India," Policy Research Working Paper Series 6307, The World Bank.
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