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Long-run growth trends and convergence across Indian States

  • R. Nagaraj

    (Indira Gandhi Institute of Development Research, Bombay, India)

  • A. Varoudakis

    (OECD, Paris, France)

  • M.-A. Véganzonès

    (INRA, Grignon, France)

This paper examines the growth performance of Indian States during 1970-94. We, first, assess the contribution of differences in the availability of physical, social, and economic infrastructure to growth performance. Our estimations account for reverse causality arising from the endogeneity of infrastructure investment. Then, combining principal components analysis and panel data estimation techniques, we provide more accurate estimates of the growth impact of specific types of infrastructure. In particular, we highlight the strong impact of primary education, health conditions, irrigation, roads and rail network, power capacities, and financial development. Moreover, we do find evidence of conditional convergence across States. This does not rule out persistent income inequalities due to the dispersion of steady-state income levels. Such disparities are accounted for by differences, first, in the structure of production, second, in infrastructure endowments, and, third, in State-specific fixed effects in the growth regression. Copyright © 2000 John Wiley & Sons, Ltd.

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Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

Volume (Year): 12 (2000)
Issue (Month): 1 ()
Pages: 45-70

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Handle: RePEc:wly:jintdv:v:12:y:2000:i:1:p:45-70
Contact details of provider: Web page: http://www3.interscience.wiley.com/journal/5102/home

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  1. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
  2. Jimenez, Emmanuel, 1995. "Human and physical infrastructure: Public investment and pricing policies in developing countries," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 43, pages 2773-2843 Elsevier.
  3. Paul Cashin & Ratna Sahay, 1995. "Internal Migration, Center-State Grants and Economic Growth in the States of India," IMF Working Papers 95/66, International Monetary Fund.
  4. Barro, R.J. & Sala-I-Martin, X., 1991. "Convergence Across States and Regions," Papers 629, Yale - Economic Growth Center.
  5. Jian, Tianlun & Sachs, Jeffrey D. & Warner, Andrew M., 1996. "Trends in regional inequality in China," China Economic Review, Elsevier, vol. 7(1), pages 1-21.
  6. repec:chb:bcchwp:03 is not listed on IDEAS
  7. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  8. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. " Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-89, September.
  9. Demetriades, Panicos O & Luintel, Kul B, 1996. "Financial Development, Economic Growth and Banker Sector Controls: Evidence from India," Economic Journal, Royal Economic Society, vol. 106(435), pages 359-74, March.
  10. Tianlun Jian & Jeffrey D. Sachs & Andrew M. Warner, 1996. "Trends in Regional Inequality in China," NBER Working Papers 5412, National Bureau of Economic Research, Inc.
  11. Sala-i-Martin, Xavier, 1994. "Regional Cohesion: Evidence and Theories of Regional Growth and Convergence," CEPR Discussion Papers 1075, C.E.P.R. Discussion Papers.
  12. Quah, Danny, 1993. "Galton's Fallacy and Tests of the Convergence Hypothesis," CEPR Discussion Papers 820, C.E.P.R. Discussion Papers.
  13. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November.
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