Industry and the urge to cluster: a study of the informal sector in India
This paper studies the determinants of firm location choice at the district-level in India to gauge the relative importance of agglomeration economies vis-à-vis good business environment. A peculiar characteristic of the Indian economy is that the unorganised nonfarm sector accounts for 43.2% of NDP and employs 71.6% of the total workforce. I analyse National Sample Survey data that covers over 4.4 million firms, in both unorganised sectors – manufacturing and services. The empirical analysis is carried out using count models, and I instrument with land revenue institutions to deal with possible endogeneity bias. I find that buyer-suppler linkages and industrial diversity make a district more attractive to economic activity, whilst the quality and level of infrastructure are also important. I conclude that public policy may be limited in its ability to encourage relocation of informal firms.
|Date of creation:||Mar 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +44 (020) 7405 7686
Web page: http://www.lse.ac.uk/
More information through EDIRC
References listed on IDEAS
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.:
- Gilles Duranton & Henry G. Overman, 2005.
"Testing for localization using micro-geographic data,"
LSE Research Online Documents on Economics
581, London School of Economics and Political Science, LSE Library.
- Gilles Duranton & Henry G. Overman, 2005. "Testing for Localization Using Micro-Geographic Data," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 1077-1106.
- Duranton, Gilles & Henry G Overman, 2003. "Testing for Localisation Using Micro-Geographic Data," Royal Economic Society Annual Conference 2003 69, Royal Economic Society.
- Gilles Duranton & Henry G. Overman, 2002. "Testing for localisation using micro-geographic data," LSE Research Online Documents on Economics 20071, London School of Economics and Political Science, LSE Library.
- Gilles Duranton & Henry Overman, 2002. "Testing for Localisation Using Micro-Geographic Data," CEP Discussion Papers dp0540, Centre for Economic Performance, LSE.
- Duranton, Gilles & Overman, Henry G, 2002. "Testing for Localization Using Micro-Geographic Data," CEPR Discussion Papers 3379, C.E.P.R. Discussion Papers.
- Keith Head & Thierry Mayer, 2004.
"Market Potential and the Location of Japanese Investment in the European Union,"
The Review of Economics and Statistics,
MIT Press, vol. 86(4), pages 959-972, November.
- Head, Keith & Mayer, Thierry, 2002. "Market Potential and the Location of Japanese Investment in the European Union," CEPR Discussion Papers 3455, C.E.P.R. Discussion Papers.
- Abhijit Banerjee & Lakshmi Iyer, 2010.
"History Institutions and Economic Performance: The Legacy of Colonial Land Tenure Systems in India,"
- Abhijit Banerjee & Lakshmi Iyer, 2005. "History, Institutions, and Economic Performance: The Legacy of Colonial Land Tenure Systems in India," American Economic Review, American Economic Association, vol. 95(4), pages 1190-1213, September.
- Carlton, Dennis W, 1983. "The Location and Employment Choices of New Firms: An Econometric Model with Discrete and Continuous Endogenous Variables," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 440-49, August.
- Krugman, Paul, 1991.
"Increasing Returns and Economic Geography,"
Journal of Political Economy,
University of Chicago Press, vol. 99(3), pages 483-99, June.
- Marshall, Alfred, 1890.
"The Principles of Economics,"
History of Economic Thought Books,
McMaster University Archive for the History of Economic Thought, number marshall1890.
- Cheng, Leonard K. & Kwan, Yum K., 2000. "What are the determinants of the location of foreign direct investment? The Chinese experience," Journal of International Economics, Elsevier, vol. 51(2), pages 379-400, August.
- Paulo Guimar�es & Octávio Figueirdo & Douglas Woodward, 2003.
"A Tractable Approach to the Firm Location Decision Problem,"
The Review of Economics and Statistics,
MIT Press, vol. 85(1), pages 201-204, February.
- Paulo Guimaraes & Octavio Figueiredo & Douglas Woodward, 2000. "A tractable approach to the firm location decision problem," NIMA Working Papers 2, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
- LAFOURCADE, Miren & MION, Giordano, 2003. "Concentration, spatial clustering and the size of plants : disentangling the sources of co-location externalities," CORE Discussion Papers 2003091, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Paulo Guimaraes & Octávio Figueiredo & Douglas Woodward, 2004. "Industrial Location Modeling: Extending the Random Utility Framework," Journal of Regional Science, Wiley Blackwell, vol. 44(1), pages 1-20.
- James W. Hardin & Henrik Schmeidiche & Raymond J. Carroll, 2003. "Instrumental variables, bootstrapping, and generalized linear models," Stata Journal, StataCorp LP, vol. 3(4), pages 351-360, December.
- Edward Feser & Edward Bergman, 2000. "National Industry Cluster Templates: A Framework for Applied Regional Cluster Analysis," Regional Studies, Taylor & Francis Journals, vol. 34(1), pages 1-19.
- Joeri Gorter & Albert Van der Horst, 2005.
"New Economic Geography, Empirics, and Regional Policy,"
ERSA conference papers
ersa05p236, European Regional Science Association.
- Joeri Gorter & Albert van der Horst & S. Brakman & H.F.L. Garretsen & M. Schram, 2005. "New economic geography, empirics, and regional policy," CPB Special Publication 56, CPB Netherlands Bureau for Economic Policy Analysis.
- Allen McDowell, 2003. "From the help desk: hurdle models," Stata Journal, StataCorp LP, vol. 3(2), pages 178-184, June.
- Dekle, Robert & Eaton, Jonathan, 1999. "Agglomeration and Land Rents: Evidence from the Prefectures," Journal of Urban Economics, Elsevier, vol. 46(2), pages 200-214, September.
- Lall, Somik & Shalizi, Zmarak & Deichmann, Uwe, 2001.
"Agglomeration economies and productivity in Indian industry,"
Policy Research Working Paper Series
2663, The World Bank.
- Lall, Somik V. & Shalizi, Zmarak & Deichmann, Uwe, 2004. "Agglomeration economies and productivity in Indian industry," Journal of Development Economics, Elsevier, vol. 73(2), pages 643-673, April.
- Deichmann, Uwe & Kaiser, Kai & Lall, Somik V & Shalizi, Zmarak, 2005. "Agglomeration, transport, and regional development in Indonesia," Policy Research Working Paper Series 3477, The World Bank.
- Somik Vinay Lall & Sanjoy Chakravorty, 2005.
"Industrial Location and Spatial Inequality: Theory and Evidence from India,"
Review of Development Economics,
Wiley Blackwell, vol. 9(1), pages 47-68, 02.
- Lall, Somik V. & Chakravorty, Sanjoy, 2004. "Industrial Location and Spatial Inequality: Theory and Evidence from India," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- Head, Keith & Ries, John, 1996. "Inter-City Competition for Foreign Investment: Static and Dynamic Effects of China's Incentive Areas," Journal of Urban Economics, Elsevier, vol. 40(1), pages 38-60, July.
- Paul M Romer, 1999.
"Increasing Returns and Long-Run Growth,"
Levine's Working Paper Archive
2232, David K. Levine.
- Megha Mukim & Peter Nunnenkamp, 2010.
"The Location Choices of Foreign Investors: A District-level Analysis in India,"
Kiel Working Papers
1628, Kiel Institute for the World Economy.
- Megha Mukim & Peter Nunnenkamp, 2012. "The Location Choices of Foreign Investors: A District-level Analysis in India," The World Economy, Wiley Blackwell, vol. 35(7), pages 886-918, 07.
- Henderson, Vernon, 2003. " The Urbanization Process and Economic Growth: The So-What Question," Journal of Economic Growth, Springer, vol. 8(1), pages 47-71, March.
- John Mullahy, 1997. "Instrumental-Variable Estimation Of Count Data Models: Applications To Models Of Cigarette Smoking Behavior," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 586-593, November.
- Austin Nichols, 2007. "IVPOIS: Stata module to estimate an instrumental variables Poisson regression via GMM," Statistical Software Components S456890, Boston College Department of Economics, revised 03 Sep 2008.
- Marius Brülhart, 1998. "Economic Geography, Industry Location and Trade: The Evidence," The World Economy, Wiley Blackwell, vol. 21(6), pages 775-801, 08.
When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:33592. 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: (LSERO Manager)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.