Long-run growth trends and convergence across Indian States

Abstract

This paper examines the growth performance of Indian States during 1970±94. We, ®rst, assess the contribution of dierences in the availability of physical, social, and economic infrastructure to growth performance. Our estimations account for reverse causality arising from the endogeneity of infrastructure investment. Then, combining principal components analysis and panel data estimation techniques, we provide more accurate estimates of the growth impact of speci®c types of infrastructure. In particular, we highlight the strong impact of primary education, health conditions, irrigation, roads and rail network, power capacities, and ®nancial development. Moreover, we do ®nd evidence of conditional convergence across States. This does not rule out persistent income inequalities due to the dispersion of steady-state income levels. Such disparities are accounted for by dierences, ®rst, in the structure of production, second, in infrastructure endowments, and, third, in State-speci®c ®xed eects in the growth regression.

Comparing Regional Development in China and India

“…That is, variations in infrastructure development and urbanization are the main sources of regional disparity in both countries. This is consistent with the findings about the role of infrastructure by Nagaraj, Varoudakis and Veganzones (2000) and urbanization by Sachs, Bajpai and Ramiah (2002). In addition, human resource development tends to play a key role in affecting regional disparity in recent years in India.…”

An Inquiry into Cities and their Role in Subnational Economic Growth in South Africa

“…According to a recent survey by De La Fuente (2000) convergence is by no means a foregone conclusion. As far as withincountry studies are concerned, recent work by Ferreira (2000), Nagaraj et al (2000), and Pekkala (2000) find evidence of regional (within country) convergence in Brazil, India and Finland, respectively.…”

The Political Economy of India's Fiscal Federal System and its Reform

“…The recent empirical findings on the political economy of Center-state transfers are of greater importance in the context of other empirical work that suggests that regional inequality in India has been growing (e.g., Cashin and Sahay, 1996;Nagaraj, Varoudakis and Veganzones, 1998;Rao, Shand and Kalirajan, 1999), and that political economy factors can dampen equalization across states through intergovernmental transfers (Rao and Singh, 2002). Furthermore, increases in the potential for greater disparities across states, as a result of market-oriented reforms, put more of the burden on an effective system of Center-state transfers.…”