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Does Openness Affect Regional Inequality? A Case Study for India

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  • Alokesh Barua
  • Pavel Chakraborty

Abstract

This paper examines the impact of economic liberalization on interregional inequality in India. It has been observed in many studies that interregional inequality in India has been steadily increasing over time. This paper is a further confirmation of this result. We have tried to locate the cause of rising interregional inequality within the production structure of the economy and observed that it is positively and systematically related to the cross-regional inequalities in agriculture and manufacturing. This systematic relationship has further been examined from a structuralist viewpoint to unravel the factors determining manufacturing production across regions where we have found that trade openness is the key factor determining the manufacturing share in income across the regions. Our further enquiry into manufacturing and trade patterns has shown that the Herfindahl index of concentration has been increasing over time on both counts. This result, along with the findings of the structuralist model about disproportionate growth of manufacturing across regions, provides an explanation of the cause of rising interregional inequality in India. Copyright (C) 2010 Blackwell Publishing Ltd.

Suggested Citation

  • Alokesh Barua & Pavel Chakraborty, 2010. "Does Openness Affect Regional Inequality? A Case Study for India," Review of Development Economics, Wiley Blackwell, vol. 14(s1), pages 447-465, August.
  • Handle: RePEc:bla:rdevec:v:14:y:2010:i:s1:p:447-465
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    Cited by:

    1. Naranpanawa, Athula & Arora, Rashmi, 2014. "Does Trade Liberalization Promote Regional Disparities? Evidence from a Multiregional CGE Model of India," World Development, Elsevier, vol. 64(C), pages 339-349.
    2. Anurag Banerjee & Nilanjan Banik, 2014. "Is India Shining?," Review of Development Economics, Wiley Blackwell, vol. 18(1), pages 59-72, February.
    3. Dilip Saikia, 2011. "Does Economic Integration Affect Spatial Concentration of Industries? Theory and a Case Study for India," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 14(42), pages 89-114, December.
    4. Saikia, Dilip, 2011. "Does Economic Integration Affect Spatial Concentration of Industries? Theory and a Case Study for India," MPRA Paper 64199, University Library of Munich, Germany.
    5. Hal Hill & Jayant Menon, 2014. "Financial safety nets in Asia: genesis, evolution, adequacy and way forward," Chapters,in: New Global Economic Architecture, chapter 5, pages 83-111 Edward Elgar Publishing.
    6. Joshua AIZENMAN & Minsoo LEE & Donghyun PARK, 2012. "The Relationship between Structural Change and Inequality: A Conceptual Overview with Special Reference to Developing Asia," Working Papers DP-2012-13, Economic Research Institute for ASEAN and East Asia (ERIA).

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