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Institutions and the quality of governance: an empirical study on interstate differences in economic development in India

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  • Bharatee Bhusana Dash

    () (Department of Economics, University of Hyderabad, India)

  • Sami Angara V. Raja

    (Department of Economics, University of Hyderabad, India)

Abstract

Economic performance is closely linked to the existence of good institutions. However, the quality of governance has also been identified as an important factor that affects economic growth and development. This paper empirically examines the significance of these factors in explaining variations in the per capita GDP of the Indian states and the extent of industrialization across them. Towards this end, indices for institutions—such as the protection of property rights, the efficiency of the legal system at the state level and the rule of law—as well as indicators of the extent and quality of State intervention and political stability, have been constructed to bring them into an empirically testable format. Empirical findings suggest that the quality of governance is significant in explaining the variations in state per capita GDP. Institutional factors play a significant role in explaining variations in the extent of industrialization across the Indian states.

Suggested Citation

  • Bharatee Bhusana Dash & Sami Angara V. Raja, 2009. "Institutions and the quality of governance: an empirical study on interstate differences in economic development in India," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 16(1), pages 1-26, June.
  • Handle: RePEc:unt:jnapdj:v:16:y:2009:i:1:p:1-26
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    References listed on IDEAS

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    1. Helliwell, John F., 1994. "Empirical Linkages Between Democracy and Economic Growth," British Journal of Political Science, Cambridge University Press, vol. 24(02), pages 225-248, April.
    2. Pranab Bardhan, 2004. "Scarcity, Conflicts, and Cooperation: Essays in the Political and Institutional Economics of Development," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262524295, January.
    3. repec:hrv:faseco:30725664 is not listed on IDEAS
    4. Shashanka Bhide & Rajesh Chadha & Kaliappa Kalirajan, 2005. "Growth interdependence among Indian states: an exploration," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 12(2), pages 59-80, December.
    5. Alesina, Alberto & Özler, Sule & Roubini, Nouriel & Swagel, Phillip, 1996. "Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
    6. repec:hrv:faseco:30747160 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Amrita Dillon & SUMON MAJUMDAR & SHARUN W. MUKAND, 2015. "Institution Building and Political Accountability," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(4), pages 504-527, August.
    2. Garg, Sandya & Ashima Goyal & Rupayan Pal, 2014. "Why tax effort falls short of capacity in Indian states: A Stochastic frontier approach," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2014-032, Indira Gandhi Institute of Development Research, Mumbai, India.
    3. Majumdar, Sumon & Mukand, Sharun W, 2013. "Institution Building and Political Economy," CAGE Online Working Paper Series 131, Competitive Advantage in the Global Economy (CAGE).

    More about this item

    Keywords

    institutions; growth; development; Indian states;

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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