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Relationships between consumption and inequality in the Indian states


  • Andrew McKay

    (Nottingham University)

  • Sarmistha Pal

    (Cardiff Business School)


Current evidence on the relationships between growth and inequality is predominantly based on cross-country data sets or panel data sets covering a small number of time periods. But these relationships, being fundamentally dynamic in nature, need to be considered over a much longer time horizon. Available state level results from the National Sample Surveys in India provide such an opportunity. This paper uses this unique data set to examine the interrelationships between average consumption and inequality within states, and test for causality. Distributional patterns of growth vary, but there is strong evidence in many instances of a strong negative effect of initial inequality on subsequent growth.

Suggested Citation

  • Andrew McKay & Sarmistha Pal, 2003. "Relationships between consumption and inequality in the Indian states," Development and Comp Systems 0309005, EconWPA.
  • Handle: RePEc:wpa:wuwpdc:0309005
    Note: Type of Document - ; pages: 30

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    References listed on IDEAS

    1. Roberto Perotti, 1993. "Political Equilibrium, Income Distribution, and Growth," Review of Economic Studies, Oxford University Press, vol. 60(4), pages 755-776.
    2. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-591, September.
    3. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
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    6. Lipton, Michael & Ravallion, Martin, 1995. "Poverty and policy," Handbook of Development Economics,in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 41, pages 2551-2657 Elsevier.
    7. Ravallion, Martin, 1999. "Are poorer states worse at targeting their poor?," Economics Letters, Elsevier, vol. 65(3), pages 373-377, December.
    8. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
    9. Datt, Gaurav*Ravallion, Martin, 1990. "Regional disparities, targeting, and poverty in India," Policy Research Working Paper Series 375, The World Bank.
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    11. repec:dau:papers:123456789/10091 is not listed on IDEAS
    12. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
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    14. Datt, Gaurav & Ravallion, Martin, 1998. "Why Have Some Indian States Done Better Than Others at Reducing Rural Poverty?," Economica, London School of Economics and Political Science, vol. 65(257), pages 17-38, February.
    15. Kul Luintel, 1999. "Non-causality due to irrelevant lag polynomials," Applied Economics Letters, Taylor & Francis Journals, vol. 6(1), pages 17-20.
    16. Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September.
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    More about this item


    Growth and inequality; Restricted VAR analysis; Causality tests; Panel data analysis; Indian states.;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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