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Globalization and its Effects on Regional Variations in Factor Substitution and Returns to Scale in the Indian Factory Sector


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  • Mishra, SK


The issue of inequality or imbalance in sectional, sectoral or regional distribution of economic and social variables is connected to welfare implications of the functioning of an economy responsible for allocation of resources, and production, distribution and consumption of the material requisites of well-being. Economic development and technological progress may or may not deliver justice in the Rawls’ sense although such development and progress might be perfectly just in Mill’s or Nietzsche’s sense. Inequalities and their dynamics are often studied in terms of collectives of gross variables – income, amenities and facilities, infrastructure, etc. – that directly impinge on the welfare of the people. However, deeper parameters are seldom studied in this regard. Nevertheless, these parameters - such as propensities to consume and save, rate and direction of substitution of factors of production, returns to scale, bias of technical progress, concentration of monopoly power, etc are altered in the process of development and determine the gross economic variables for a fairly long period. In this study we make an attempt to look into the spatial/regional distribution of a few structural parameters in the factory sector of India and purport to examine if, in the wake of globalization, there have been substantial changes in their distribution. Our main apparatus of analysis is ‘production functions’ that permit variable elasticities of factor substitution and returns to scale. We use data at the state level for 1990-91 and 2003-04 for our analysis.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3265.

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Date of creation: 17 May 2007
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Handle: RePEc:pra:mprapa:3265

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Keywords: Globalization; liberalization; industrialization; manufacturing sector; regional distribution; inequality; production function; variable returns to scale; substitution; factors of productions; India; state-level data;

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  1. Jesus Felipe & F. Gerard Adams, 2005. ""A Theory of Production" The Estimation of the Cobb-Douglas Function: A Retrospective View," Eastern Economic Journal, Eastern Economic Association, vol. 31(3), pages 427-445, Summer.
  2. Zellner, A & Revankar, N S, 1969. "Generalized Production Functions," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 36(106), pages 241-50, April.
  3. Lall, Somik & Shalizi, Zmarak & Deichmann, Uwe, 2001. "Agglomeration economies and productivity in Indian industry," Policy Research Working Paper Series 2663, The World Bank.
  4. Amitava K. Dutt & J. Mohan Rao, 2000. "Globalization and its Social Discontents: The Case of India," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2000-06, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
  5. Sato, Ryuzo, 1975. "The Most General Class of CES Functions," Econometrica, Econometric Society, Econometric Society, vol. 43(5-6), pages 999-1003, Sept.-Nov.
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