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

  • Douhan, Robin

    ()

    (The Research Institute of Industrial Economics)

  • Nordberg, Anders

    ()

    (Department of Economics)

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.

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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2007:16.

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Length: 33 pages
Date of creation: 01 Jun 2007
Date of revision:
Handle: RePEc:hhs:uunewp:2007_016
Contact details of provider: Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
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Fax: + 46 18 471 14 78
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