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Discrimination or Social Networks? Industrial Investment in Colonial India

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  • Gupta, Bishnupriya

Abstract

Industrial investment in Colonial India was segregated by the export oriented industries, such as tea and jute that relied on British firms and the import substituting cotton textile industry that was dominated by Indian firms. The literature emphasizes discrimination against Indian capital. Instead informational factors played an important role. British entrepreneurs knew the export markets and the Indian entrepreneurs were familiar with the local markets. The divergent flows of entrepreneurship can be explained by the comparative advantage enjoyed by social groups in information and the role of social networks in determining entry and creating separate spheres of industrial investment.
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  • Gupta, Bishnupriya, 2014. "Discrimination or Social Networks? Industrial Investment in Colonial India," The Journal of Economic History, Cambridge University Press, vol. 74(01), pages 141-168, March.
  • Handle: RePEc:cup:jechis:v:74:y:2014:i:01:p:141-168_00
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    1. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 1998. "Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 151-170, Summer.
    2. Marcel Fafchamps & Bart Minten, 1999. "Relationships and traders in Madagascar," Journal of Development Studies, Taylor & Francis Journals, vol. 35(6), pages 1-35.
    3. Gordon, Roger H & Bovenberg, A Lans, 1996. "Why Is Capital So Immobile Internationally? Possible Explanations and Implications for Capital Income Taxation," American Economic Review, American Economic Association, vol. 86(5), pages 1057-1075, December.
    4. Bishnupriya Gupta, 2011. "Wages, unions, and labour productivity: evidence from Indian cotton mills," Economic History Review, Economic History Society, vol. 64(s1), pages 76-98, February.
    5. James Foreman-Peck, 1989. "Foreign investment and imperial exploitation: balance of payments reconstruction for nineteenth-century Britain and India," Economic History Review, Economic History Society, vol. 42(3), pages 354-374, August.
    6. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
    7. Portes, Richard & Rey, Helene & Oh, Yonghyup, 2001. "Information and capital flows: The determinants of transactions in financial assets," European Economic Review, Elsevier, vol. 45(4-6), pages 783-796, May.
    8. Kaivan Munshi, 2011. "Strength in Numbers: Networks as a Solution to Occupational Traps," Review of Economic Studies, Oxford University Press, vol. 78(3), pages 1069-1101.
    9. Morris, Morris David, 1979. "South Asian entrepreneurship and the rashomon effect, 1800-1947," Explorations in Economic History, Elsevier, vol. 16(3), pages 341-361, July.
    10. Morris, Morris David, 1967. "Values as an Obstacle to Economic Growth in South Asia: An Historical Survey," The Journal of Economic History, Cambridge University Press, vol. 27(04), pages 588-607, December.
    11. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
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    Cited by:

    1. Gupta, Bishnupriya & Mookherjee, Dilip & Munshi, Kaivan & Sanclemente, Mario, 2019. "Community Origins of Industrial Entrepreneurship in Pre-Independence India," The Warwick Economics Research Paper Series (TWERPS) 1189, University of Warwick, Department of Economics.
    2. repec:eee:deveco:v:127:y:2017:i:c:p:459-469 is not listed on IDEAS
    3. Gupta, Bishnupriya & Mookherjee, Dilip & Munshi, Kaivan & Sanclemente, Mario, 2019. "Community Origins of Industrial Entrepreneurship in Pre-Independence India," CAGE Online Working Paper Series 402, Competitive Advantage in the Global Economy (CAGE).
    4. repec:eee:deveco:v:127:y:2017:i:c:p:413-430 is not listed on IDEAS
    5. Bishnupriya Gupta & Dilip Mookherjee & Kaivan Munshi & Mario Sanclemente, 2018. "Community Origins of Industrial Entrepreneurship in Pre-Independence India," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-318, Boston University - Department of Economics.
    6. Alvaredo, Facundo & Bergeron, Augustin & Cassan, Guilhem, 2017. "Income concentration in British India, 1885–1946," Journal of Development Economics, Elsevier, vol. 127(C), pages 459-469.
    7. Gani Aldashev & Catherine Guirkinger, 2016. "Colonization and Changing Social Structure: Kazakhstan 1896-1910," Working Papers ECARES ECARES 2016-10, ULB -- Universite Libre de Bruxelles.
    8. repec:eee:exehis:v:65:y:2017:i:c:p:36-54 is not listed on IDEAS
    9. Munshi, K., 2017. "Caste and the Indian Economy," Cambridge Working Papers in Economics 1759, Faculty of Economics, University of Cambridge.

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