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Estimating Urban Agglomeration Economies for India: A New Economic Geography Perspective

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  • Tripathi, Sabyasachi

Abstract

The main objective of this paper is to provide answer to an important question: Are Indian firms or industries in urban areas operating under decreasing returns to scale or increasing returns to scale? Scale economies are one of the main assumptions of new economic geography models that posit the formation of agglomeration economies. For this purpose, we use Kanemoto et al. (1996) model for estimation of aggregate production function and to derive the magnitude of scale economies. Using firm level data in 2004-05 from the Annual Survey of Industry, we find that urban firms in Indian industry operate under decreasing returns to scale.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 43501.

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Date of creation: Dec 2012
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Handle: RePEc:pra:mprapa:43501

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Keywords: Economic geography; Urban agglomeration; Firm level analysis; Manufacturing industry; India;

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  1. 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.
  2. 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.
  3. Greenhut, John G & Greenhut, M L, 1975. "Spatial Price Discrimination, Competition and Locational Effects," Economica, London School of Economics and Political Science, vol. 42(168), pages 401-19, November.
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  7. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  8. Yoshitsugu Kanemoto, 1985. "Optimal Cities with Indivisibility in Production and Interactions Between Firms," Working Papers 597, Queen's University, Department of Economics.
  9. Starrett, David, 1978. "Market allocations of location choice in a model with free mobility," Journal of Economic Theory, Elsevier, vol. 17(1), pages 21-37, February.
  10. Yoshibumi Aso, 2008. "Social Overhead Capital Development and Geographical Concentration," Macroeconomics Working Papers 22593, East Asian Bureau of Economic Research.
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  12. Sridhar, Kala Seetharam & Wan, Guanghua, 2010. "Firm location choice in cities: Evidence from China, India, and Brazil," China Economic Review, Elsevier, vol. 21(1), pages 113-122, March.
  13. Sanjoy Chakravorty, 2003. "Industrial location in post-reform India: patterns of inter-regional divergence and intra-regional convergence," The Journal of Development Studies, Taylor and Francis Journals, vol. 40(2), pages 120-152.
  14. Yoshibumi Aso, 2008. "Social Overhead Capital Development and Geographical Concentration," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 4(1), pages 111-132, December.
  15. Lall, Somik V. & Rodrigo, G. Chris, 2001. "Perspectives on the Sources of Heterogeneity in Indian Industry," World Development, Elsevier, vol. 29(12), pages 2127-2143, December.
  16. Marshall, Alfred, 1890. "The Principles of Economics," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number marshall1890.
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