IDEAS home Printed from https://ideas.repec.org/p/fip/fedpwp/06-16.html
   My bibliography  Save this paper

A tale of two states: Maharashtra and West Bengal

Author

Listed:
  • Amartya Lahiri
  • Kei-Mu Yi

Abstract

In this paper the authors study the economic evolution between 1960 and 1995 of two states in India — Maharashtra and West Bengal. In 1960, West Bengal’s per capita income exceeded that of Maharashtra. By 1995, it had fallen to just 69 percent of Maharashtra’s per capita income. The authors employ a "wedge" methodology based on the first order conditions of a multi-sector neoclassical growth model to ascertain the sources of the divergent economic performances. Their diagnostic analysis reveals that a large part of West Bengal’s development woes can be attributed to: (a) low sectoral productivity, especially in manufacturing and services; and (b) sectoral misallocation in labor markets. These patterns, together with additional evidence on developments in the labor market, the manufacturing sector, and voting behavior, suggest a systematic worsening of the business environment in manufacturing in West Bengal during this period.

Suggested Citation

  • Amartya Lahiri & Kei-Mu Yi, 2006. "A tale of two states: Maharashtra and West Bengal," Working Papers 06-16, Federal Reserve Bank of Philadelphia.
  • Handle: RePEc:fip:fedpwp:06-16
    as

    Download full text from publisher

    File URL: http://www.philadelphiafed.org/research-and-data/publications/working-papers/2006/wp06-16.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Philippe Aghion & Robin Burgess & Stephen J. Redding & Fabrizio Zilibotti, 2008. "The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India," American Economic Review, American Economic Association, vol. 98(4), pages 1397-1412, September.
    2. Kochhar, Kalpana & Kumar, Utsav & Rajan, Raghuram & Subramanian, Arvind & Tokatlidis, Ioannis, 2006. "India's pattern of development: What happened, what follows?," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 981-1019, July.
    3. Ingram, Beth Fisher & Kocherlakota, Narayana R. & Savin, N. E., 1994. "Explaining business cycles: A multiple-shock approach," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 415-428, December.
    4. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    5. Harold L. Cole & Lee E. Ohanian, 2004. "New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 779-816, August.
    6. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1403-1448.
    7. Sanghamitra Bandyopadhyay, 2003. "Convergence Club Empirics: Some Dynamics and Explanations of Unequal Growth across Indian States," STICERD - Distributional Analysis Research Programme Papers 69, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    8. Harold L. Cole & Lee E. Ohanian, 2002. "The U.S. and U.K. Great Depressions Through the Lens of Neoclassical Growth Theory," American Economic Review, American Economic Association, vol. 92(2), pages 28-32, May.
    9. Casey B. Mulligan, 2005. "Public policies as specification errors," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(4), pages 902-926, October.
    10. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2007. "Business Cycle Accounting," Econometrica, Econometric Society, vol. 75(3), pages 781-836, May.
    11. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters,in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114 National Bureau of Economic Research, Inc.
    12. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
    13. Catriona Purfield, 2006. "Mind the Gap—Is Economic Growth in India Leaving Some States Behind?," IMF Working Papers 06/103, International Monetary Fund.
    14. Timothy Besley & Robin Burgess, 2004. "Can Labor Regulation Hinder Economic Performance? Evidence from India," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 91-134.
    15. Psacharopoulos, George, 1994. "Returns to investment in education: A global update," World Development, Elsevier, vol. 22(9), pages 1325-1343, September.
    16. Abhijit Banerjee & Kaivan Munshi, 2004. "How Efficiently is Capital Allocated? Evidence from the Knitted Garment Industry in Tirupur," Review of Economic Studies, Oxford University Press, vol. 71(1), pages 19-42.
    17. Banerjee, Abhijit V. & Duflo, Esther, 2005. "Growth Theory through the Lens of Development Economics," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 7, pages 473-552 Elsevier.
    18. Timothy J Kehoe & Kim J. Ruhl, 2003. "Recent Great Depressions: Aggregate Growth in New Zealand and Switzerland," Levine's Working Paper Archive 506439000000000529, David K. Levine.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shu-Shiuan Lu, 2012. "East Asian growth experience revisited from the perspective of a neoclassical model," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(3), pages 359-376, July.
    2. Chakraborty, Suparna & Otsu, Keisuke, 2012. "Deconstructing Growth - A Business Cycle Accounting Approach with application to BRICs," MPRA Paper 41076, University Library of Munich, Germany.
    3. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1403-1448.
    4. Subhash C. Ray & Abhiman Das & Kankana Mukherjee, 2017. "Labor-Cost Efficiency with Indivisible Outputs and Inputs: A Study of Indian Bank Branches," Working papers 2017-04, University of Connecticut, Department of Economics.
    5. Gupta, Abhay, 2007. "Indian Economy - TFP or Factor Accumulation: A Comprehensive Growth Accounting Exercise," MPRA Paper 10316, University Library of Munich, Germany.
    6. Mukherji, Arnab & Mukherji, Anjan, 2012. "Bihar: What Went Wrong? And What Changed?," Working Papers 12/107, National Institute of Public Finance and Policy.
    7. John Bailey Jones & Sohini Sahu, 2017. "Transition accounting for India in a multi-sector dynamic general equilibrium model," Economic Change and Restructuring, Springer, vol. 50(4), pages 299-339, November.
    8. Utsav Kumar & Arvind Subramanian, 2011. "India's Growth in the 2000s: Four Facts," Working Paper Series WP11-17, Peterson Institute for International Economics.
    9. Viktoria Hnatkovska & Michael Devereux, 2009. "International and Intra-national Real Exchange Rates: Evidence and Theory," 2009 Meeting Papers 1213, Society for Economic Dynamics.
    10. Hansen, G.D. & Ohanian, L.E., 2016. "Neoclassical Models in Macroeconomics," Handbook of Macroeconomics, Elsevier.
    11. repec:spr:ijlaec:v:60:y:2017:i:2:d:10.1007_s41027-017-0097-9 is not listed on IDEAS
    12. Ankita Mishra & Vinod Mishra, 2016. "Is there a conditional convergence in the per capita incomes of BIMAROU states in India?," Monash Economics Working Papers 03-16, Monash University, Department of Economics.

    More about this item

    Keywords

    India;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedpwp:06-16. 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: (Beth Paul). General contact details of provider: http://edirc.repec.org/data/frbphus.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.