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Estimating Urban Agglomeration Economies for India: A New Economic Geography Perspective

Listed author(s):
  • Tripathi, Sabyasachi

The main objective of this paper is to provide answer to an important question: Are Indian firms or industries in urban areas operating under decreasing returns to scale or increasing returns to scale? Scale economies are one of the main assumptions of new economic geography models that posit the formation of agglomeration economies. For this purpose, we use Kanemoto et al. (1996) model for estimation of aggregate production function and to derive the magnitude of scale economies. Using firm level data in 2004-05 from the Annual Survey of Industry, we find that urban firms in Indian industry operate under decreasing returns to scale.

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File URL: https://mpra.ub.uni-muenchen.de/43501/1/MPRA_paper_43501.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 43501.

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Date of creation: Dec 2012
Handle: RePEc:pra:mprapa:43501
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  2. Lall, Somik & Shalizi, Zmarak & Deichmann, Uwe, 2001. "Agglomeration economies and productivity in Indian industry," Policy Research Working Paper Series 2663, The World Bank.
  3. Greenhut, John G & Greenhut, M L, 1975. "Spatial Price Discrimination, Competition and Locational Effects," Economica, London School of Economics and Political Science, vol. 42(168), pages 401-419, November.
  4. Kanemoto, Yoshitsugu, 1990. "Optimal cities with indivisibility in production and interactions between firms," Journal of Urban Economics, Elsevier, vol. 27(1), pages 46-59, January.
  5. Marshall, Alfred, 1890. "The Principles of Economics," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number marshall1890.
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  7. Rullan Rinaldi & Eva Nurwita, 2011. "Rise And Fall Of Cities, Measuring Spatial Clustering And Economies Of Urban Agglomeration In West Java," Working Papers in Economics and Development Studies (WoPEDS) 201104, Department of Economics, Padjadjaran University, revised Jun 2011.
  8. Ejaz Ghani & Arti Grover Goswami & William R. Kerr, 2012. "Is India’s Manufacturing Sector Moving Away From Cities?," Harvard Business School Working Papers 12-090, Harvard Business School.
  9. OTTAVIANO, Gianmarco I.P. & THISSE, Jacques-François, "undated". "New Economic geography: what about the N?," CORE Discussion Papers RP 1790, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Paul Krugman, 1999. "The Role of Geography in Development," International Regional Science Review, , vol. 22(2), pages 142-161, August.
  11. Yoshibumi Aso, 2008. "Social Overhead Capital Development and Geographical Concentration," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 4(1), pages 111-132, December.
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  13. Sanjoy Chakravorty, 2003. "Industrial location in post-reform India: patterns of inter-regional divergence and intra-regional convergence," Journal of Development Studies, Taylor & Francis Journals, vol. 40(2), pages 120-152.
  14. Lall, Somik V. & Rodrigo, G. Chris, 2001. "Perspectives on the Sources of Heterogeneity in Indian Industry," World Development, Elsevier, vol. 29(12), pages 2127-2143, December.
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  16. Lall, Somik V. & Mengistae, Taye, 2005. "Business environment, clustering, and industry location : evidence from Indian cities," Policy Research Working Paper Series 3675, The World Bank.
  17. Yoshibumi Aso, 2008. "Social Overhead Capital Development and Geographical Concentration," Macroeconomics Working Papers 22593, East Asian Bureau of Economic Research.
  18. Henderson, J. Vernon & Shalizi, Zmarak & Venables, Anthony J., 2000. "Geography and development," Policy Research Working Paper Series 2456, The World Bank.
  19. Lall, Somik V. & Chakravorty, Sanjoy, 2004. "Industrial Location and Spatial Inequality: Theory and Evidence from India," WIDER Working Paper Series 049, World Institute for Development Economic Research (UNU-WIDER).
  20. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
  21. Kanemoto, Yoshitsugu & Ohkawara, Toru & Suzuki, Tsutomu, 1996. "Agglomeration Economies and a Test for Optimal City Sizes in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 10(4), pages 379-398, December.
  22. Diego Puga, 2009. "The magnitude and causes of agglomeration economies," Working Papers 2009-09, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  23. Sanjoy Chakravorty & Jun Koo & Somik V Lall, 2005. "Do localization economies matter in cluster formation? Questioning the conventional wisdom with data from Indian metropolises," Environment and Planning A, Pion Ltd, London, vol. 37(2), pages 331-353, February.
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