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Demand linkages and spatial agglomeration of Indian states

Author

Listed:
  • Andrzej Cieślik

    (Faculty of Economic Sciences, University of Warsaw)

  • Sadananda Prusty

    (Institute of Management Technology)

Abstract

In this paper, we examine the spatial relationship between wages and consumer purchasing power across Indian states to see whether regional demand linkages contribute to spatial agglomeration. We estimate a variety of the market-potential functions derived from the Harris model as well as more recent models of the New Economic Geography. Besides market-potential, we consider housing stock, density of roadways, density of telecom, and dummies to capture cyclical fluctuations as parameters of consumer purchasing power and demand to explore the importance of scale economies and transport costs. The estimation results suggest that all the above factors influence demand linkages between states, which are strong and growing over the period from 1999-2000 to 2007-2008.

Suggested Citation

  • Andrzej Cieślik & Sadananda Prusty, 2011. "Demand linkages and spatial agglomeration of Indian states," Working Papers 2011-04, Faculty of Economic Sciences, University of Warsaw.
    • Handle: RePEc:war:wpaper:2011-04
    as

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    File URL: http://www.wne.uw.edu.pl/inf/wyd/WP/WNE_WP44.pdf
    File Function: First version, 2011
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    References listed on IDEAS

    as
    1. Frank G. Van Oort, 2007. "Spatial and sectoral composition effects of agglomeration economies in the Netherlands," Papers in Regional Science, Wiley Blackwell, vol. 86(1), pages 5-30, March.
    2. Marius Brülhart & Matthieu Crozet & Pamina Koenig, 2004. "Enlargement and the EU Periphery: The Impact of Changing Market Potential," The World Economy, Wiley Blackwell, vol. 27(6), pages 853-875, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Spatial agglomeration; Scale economies; Wage differentials; Regional studies;
    All these keywords.

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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