On Regional Inequality and Growth in India: Theory and Evidence
This paper examines, both theoretically and empirically, how initial inequality affects economic growth with particular reference to the subnational states in India, for which no such evidence exists. The theoretical model is characterized by endogenous growth within an OLG set-up, where growth of the subnational economy is driven by productive public investment financed by a linear output tax, and the optimum tax is determined by the median voter rule. State-level data for the period 1960-94 from sixteen major subnational states in India are used to investigate the nature of the 'reverse causation'. Both single cross-section and pooled regression estimates suggest a negative relationship between initial inequality and growth: more initially unequal states need to have more redistributive measures as dictated by the majority voters which in turn creates distortionary effects and lower growth. However rural inequality seems to matter more than urban inequality.
|Date of creation:||01 Aug 2000|
|Date of revision:|
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Oded Galor & Joseph Zeira, 2013.
"Income Distribution and Macroeconomics,"
2013-12, Brown University, Department of Economics.
- Saint-Paul, G. & Verdier, T., 1991.
"Education, Democracy and growth,"
DELTA Working Papers
91-27, DELTA (Ecole normale supérieure).
- Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
- 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.
- Paul Cashin & Ratna Sahay, 1996. "Internal Migration, Center-State Grants, and Economic Growth in the States of India," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 123-171, March.
- Partridge, Mark D, 1997. "Is Inequality Harmful for Growth? Comment," American Economic Review, American Economic Association, vol. 87(5), pages 1019-32, December.
- Richard Blundell & Ian Preston, 1998.
"Consumption Inequality and Income Uncertainty,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 113(2), pages 603-640.
- Ravallion, Martin, 1995. "Growth and poverty: Evidence for developing countries in the 1980s," Economics Letters, Elsevier, vol. 48(3-4), pages 411-417, June.
- Rodrik, Dani & Alesina, Alberto, 1994.
"Distributive Politics and Economic Growth,"
4551798, Harvard University Department of Economics.
- Roberto Perotti, 1993. "Political Equilibrium, Income Distribution, and Growth," Review of Economic Studies, Oxford University Press, vol. 60(4), pages 755-776.
- Robert J. Barro, 1989.
"Economic Growth in a Cross Section of Countries,"
NBER Working Papers
3120, National Bureau of Economic Research, Inc.
- Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 465-490.
- Persson, T. & Tabellini, G., 1993.
"Is Inequality Harmful for Growth,"
537, Stockholm - International Economic Studies.
- Abhijit V. Banerjee & Andrew F. Newman, 1998. "Information, the Dual Economy, and Development," Review of Economic Studies, Oxford University Press, vol. 65(4), pages 631-653.
- Ravallion, Martin & Datt, Gaurav, 1996. "How Important to India's Poor Is the Sectoral Composition of Economic Growth?," World Bank Economic Review, World Bank Group, vol. 10(1), pages 1-25, January.
- Olivier J. Blanchard, 1984.
"Debt, Deficits and Finite Horizons,"
NBER Working Papers
1389, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:ecm:wc2000:1391. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.