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Is the elephant stepping on its trunk? The problem of India´s unbalanced growth

Author

Listed:
  • Douhan, Robin

    (The Research Institute of Industrial Economics)

  • Nordberg, Anders

    (Department of Economics)

Abstract

It is often assumed that recent success in the high-technology software industry will lead India’s development. However, evidence suggests that basic manufacturing industry is stagnant. This paper proposes a mechanism that ties these two trends together. A big-push type of model, featuring linkages between firms, demand spill-over, and technology choice is elaborated. By imposing di¤erent cost structures on the manufacturing and high-technology industries the model describes outcome in terms of distribution between sectors. It is found that a policy promoting a high-technology sector can have negative effects on the manufacturing industry as well as aggregate income. A policy directing resources towards infrastructure benefits all sectors and increases aggregate income. The results from the model are found to correpond with the recent development pattern in India.

Suggested Citation

  • Douhan, Robin & Nordberg, Anders, 2007. "Is the elephant stepping on its trunk? The problem of India´s unbalanced growth," Working Paper Series 2007:16, Uppsala University, Department of Economics.
  • Handle: RePEc:hhs:uunewp:2007_016
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    Cited by:

    1. Ohlsson, Henry, 2007. "The legacy of the Swedish gift and inheritance tax, 1884–2004," Working Paper Series 2007:23, Uppsala University, Department of Economics.

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    More about this item

    Keywords

    Industrialization; India; Industrial structure;
    All these keywords.

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy

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