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Industrial Location and Spatial Inequality: Theory and Evidence from India

  • Lall, Somik V.
  • Chakravorty, Sanjoy

The authors argue that spatial inequality of industry location is a primary cause of spatial income inequality in developing nations. Their study focuses on understanding the process of spatial industrial variation: identifying the spatial factors that have cost implications for firms, and the factors that influence the location decisions of new industrial units. The analysis has two parts. First the authors examine the contribution of economic geography factors to the cost structure of firms in eight industry sectors and show that local industrial diversity is the one factor with significant and substantial cost-reducing effects. They then show that new private sector industrial investments in India are biased toward existing industrial and coastal districts, whereas state industrial investments (in deep decline after structural reforms) are far less biased toward such districts. The authors conclude that structural reforms lead to increased spatial inequality in industrialization, and therefore, income. Copyright United Nations University 2005.

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File URL: http://www.wider.unu.edu/stc/repec/pdfs/rp2004/rp2004-49.pdf
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Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number UNU-WIDER Research Paper RP2004/49.

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Length: 28 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:unu:wpaper:rp2004-49
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  1. 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.
  2. Simon J. Evenett & Wolfgang Keller, 2002. "On Theories Explaining the Success of the Gravity Equation," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 281-316, April.
  3. J. Vernon Henderson, 2000. "The Effects of Urban Concentration on Economic Growth," NBER Working Papers 7503, National Bureau of Economic Research, Inc.
  4. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  5. Lall, Somik V. & Funderburg, Richard & Yepes, Tito, 2003. "Location, concentration, and performance of economic activity in Brazil," Policy Research Working Paper Series 3268, The World Bank.
  6. 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.
  7. Markusen, Ann & Hall, Peter & Campbell, Scott & Deitrick, Sabina, 1991. "The Rise of the Gunbelt: The Military Remapping of Industrial America," OUP Catalogue, Oxford University Press, number 9780195066487, March.
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