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|
|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.:
- Barro, R.J., 1989.
"Economic Growth In A Cross Section Of Countries,"
RCER Working Papers
201, University of Rochester - Center for Economic Research (RCER).
- Alberto Alesina & Dani Rodrik, 1991.
"Distributive Politics and Economic Growth,"
NBER Working Papers
3668, National Bureau of Economic Research, Inc.
- Galor, Oded & Zeira, Joseph, 1988.
"Income Distribution and Macroeconomics,"
51644, University Library of Munich, Germany, revised 01 Sep 1989.
- 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.
- Saint-Paul, Gilles & Verdier, Thierry, 1992.
"Education, Democracy and Growth,"
CEPR Discussion Papers
613, C.E.P.R. Discussion Papers.
- Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 465-490.
- Richard Blundell & Ian Preston, 1997.
"Consumption, inequality and income uncertainty,"
IFS Working Papers
W97/15, Institute for Fiscal Studies.
- 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.
- Persson, T. & Tabellini, G., 1993.
"Is Inequality Harmful for Growth,"
537, Stockholm - International Economic Studies.
- Partridge, Mark D, 1997. "Is Inequality Harmful for Growth? Comment," American Economic Review, American Economic Association, vol. 87(5), pages 1019-1032, December.
- Roberto Perotti, 1993. "Political Equilibrium, Income Distribution, and Growth," Review of Economic Studies, Oxford University Press, vol. 60(4), pages 755-776.
- 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.
- Blanchard, Olivier J, 1985.
"Debt, Deficits, and Finite Horizons,"
Journal of Political Economy,
University of Chicago Press, vol. 93(2), pages 223-247, April.
- 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, 1995. "Growth and poverty: Evidence for developing countries in the 1980s," Economics Letters, Elsevier, vol. 48(3-4), pages 411-417, June.
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.