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Capital source and the location of industrial investment: a tale of divergence from post-reform India

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  • Sanjoy Chakravorty

    (Temple University, Philadelphia, USA)

Abstract

The industrial locational decisions of private capital are expected to be profit-maximizing or efficiency-oriented, and directed towards leading industrial regions, coasts and metropolises, and away from socialist governments. Industrial investments by the state, on the other hand, are expected to consider equity and security issues, and therefore be less biased towards leading regions. Since the state as an agent of industrialization is weaker under liberalization, and private capital is increasingly dominant, structural reforms can be expected to lead to increased regional divergence. These propositions are tested using district-level data from the pre-reform and post-reform periods in India using logistic and OLS regression models. The results provide unambiguous support for the outlined propositions and raise concerns about the political and welfare implications of these location decisions. Copyright © 2003 John Wiley & Sons, Ltd.

Suggested Citation

  • Sanjoy Chakravorty, 2003. "Capital source and the location of industrial investment: a tale of divergence from post-reform India," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(3), pages 365-383.
  • Handle: RePEc:wly:jintdv:v:15:y:2003:i:3:p:365-383 DOI: 10.1002/jid.976
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    References listed on IDEAS

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    1. Hanushek, Eric A & Song, Byung Nak, 1978. "The Dynamics of Postwar Industrial Location," The Review of Economics and Statistics, MIT Press, vol. 60(4), pages 515-522, November.
    2. Krugman, Paul & Elizondo, Raul Livas, 1996. "Trade policy and the Third World metropolis," Journal of Development Economics, Elsevier, pages 137-150.
    3. Krugman, Paul & Elizondo, Raul Livas, 1996. "Trade policy and the Third World metropolis," Journal of Development Economics, Elsevier, pages 137-150.
    4. Markusen, Ann & Hall, Peter & Campbell, Scott & Deitrick, Sabina, 1991. "The Rise of the Gunbelt: The Military Remapping of Industrial America," OUP Catalogue, Oxford University Press, number 9780195066487.
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    Cited by:

    1. Hanas Cader & John Leatherman, 2011. "Small business survival and sample selection bias," Small Business Economics, Springer, pages 155-165.
    2. Bunyaratavej, Kraiwinee & Hahn, Eugene D. & Doh, Jonathan P., 2008. "Multinational investment and host country development: Location efficiencies for services offshoring," Journal of World Business, Elsevier, vol. 43(2), pages 227-242, March.
    3. Saikia, Dilip, 2009. "Industrial Location in India under Liberalization," MPRA Paper 27821, University Library of Munich, Germany.
    4. Dirk Holtbrügge & Carina B. Friedmann, 2016. "Does location choice affect foreign subsidiary success in India? An empirical study based on Porter's diamond model," International Journal of Business and Emerging Markets, Inderscience Enterprises Ltd, vol. 8(1), pages 3-29.

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