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Understanding divergence in India: a political economy approach

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  • Chetan Ghate

Abstract

We construct a simple political economy model with imperfect capital markets to explain infrastructure investments across Indian states. The model predicts that: i) the fixed cost of accessing the modern sector, ii) the initial stock of infrastructure, iii) median voter wealth, and iv) corruption, can all potentially explain why different states have different levels of infrastructure investments. The theoretical model is motivated by recent empirical work on India that argues that the reason per‐capita income across Indian states has diverged is because of the distribution of infrastructure investments.

Suggested Citation

  • Chetan Ghate, 2008. "Understanding divergence in India: a political economy approach," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 11(1), pages 1-9.
    • Handle: RePEc:taf:jecprf:v:11:y:2008:i:1:p:1-9
    DOI: 10.1080/17487870802031411
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    References listed on IDEAS

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    1. Dani Rodrik, 1998. "Has Globalization Gone Too Far?," Challenge, Taylor & Francis Journals, vol. 41(2), pages 81-94, March.
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    Cited by:

    1. Chanda, Areendam & Kabiraj, Sujana, 2020. "Shedding light on regional growth and convergence in India," World Development, Elsevier, vol. 133(C).
    2. Cledwyn Fernandez, 2023. "Competition between postal and bank branches for household savings: Empirical evidence from India," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(8), pages 4363-4376, December.
    3. Mohanty, Biswajit & Bhanumurthy, N. R. & Dastidar, Ananya Ghosh, 2017. "What explains Regional Imbalances in Infrastructure?: Evidence from Indian States," Working Papers 17/197, National Institute of Public Finance and Policy.
    4. Ghate, Chetan & Wright, Stephen, 2012. "The “V-factor”: Distribution, timing and correlates of the great Indian growth turnaround," Journal of Development Economics, Elsevier, vol. 99(1), pages 58-67.
    5. Biswajit Mohanty & N.R. Bhanumurthy & Ananya Ghosh Dastidar, 2017. "What explains regional imbalances in public infrastructure expenditure? Evidence from Indian states," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 24(2), pages 113-139, December.
    6. Timilsina,Govinda R. & Sahoo,Pravakar & Dash,Ranjan Kumar, 2022. "Why Do Indian States Differ in Their Infrastructure Development ?," Policy Research Working Paper Series 10086, The World Bank.
    7. Naresh Kumar & Ritu Rani, 2020. "Extent of Social Change in Family Quality of Life Index: Empirical Evidence from Selected States of India," South Asian Survey, , vol. 27(1), pages 62-80, March.
    8. Das, Samarjit & Ghate, Chetan & Robertson, Peter E., 2015. "Remoteness, Urbanization, and India’s Unbalanced Growth," World Development, Elsevier, vol. 66(C), pages 572-587.

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