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Does Openness Affect Regional Inequality? A Case Study for India

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  • Alokesh Barua
  • Pavel Chakraborty

Abstract

This paper examines the impact of economic liberalization on interregional inequality in India. It has been observed in many studies that interregional inequality in India has been steadily increasing over time. This paper is a further confirmation of this result. We have tried to locate the cause of rising interregional inequality within the production structure of the economy and observed that it is positively and systematically related to the cross-regional inequalities in agriculture and manufacturing. This systematic relationship has further been examined from a structuralist viewpoint to unravel the factors determining manufacturing production across regions where we have found that trade openness is the key factor determining the manufacturing share in income across the regions. Our further enquiry into manufacturing and trade patterns has shown that the Herfindahl index of concentration has been increasing over time on both counts. This result, along with the findings of the structuralist model about disproportionate growth of manufacturing across regions, provides an explanation of the cause of rising interregional inequality in India. Copyright (C) 2010 Blackwell Publishing Ltd.

Suggested Citation

  • Alokesh Barua & Pavel Chakraborty, 2010. "Does Openness Affect Regional Inequality? A Case Study for India," Review of Development Economics, Wiley Blackwell, vol. 14(s1), pages 447-465, August.
    • Handle: RePEc:bla:rdevec:v:14:y:2010:i:s1:p:447-465
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    References listed on IDEAS

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    1. Krugman, Paul & Elizondo, Raul Livas, 1996. "Trade policy and the Third World metropolis," Journal of Development Economics, Elsevier, vol. 49(1), pages 137-150, April.
    2. Sandwip Das & Alokesh Barua, 1996. "Regional inequalities, economic growth and liberalisation: A study of the Indian economy," Journal of Development Studies, Taylor & Francis Journals, vol. 32(3), pages 364-390.
    3. Gajwani, Kiran & Kanbur, Ravi & Zhang, Xiaobo, 2006. "Comparing the evolution of spatial inequality in China and India: a fifty-year perspective," DSGD discussion papers 44, International Food Policy Research Institute (IFPRI).
    4. Zhang, Xiaobo & Fan, Shenggen, 2002. "Infrastructure, Openness, And Regional Inequality In India," 2002 Annual meeting, July 28-31, Long Beach, CA 19902, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Jeffrey D. Sachs & Nirupam Bajpai & Ananthi Ramiah, 2002. "Understanding Regional Economic Growth in India," Asian Economic Papers, MIT Press, vol. 1(3), pages 32-62.
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    Citations

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    Cited by:

    1. Dilip Saikia, 2016. "Location Pattern of Unorganised Manufacturing Industries in India: A District-level View," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 10(2), pages 225-263, May.
    2. Anurag Banerjee & Nilanjan Banik, 2014. "Is India Shining?," Review of Development Economics, Wiley Blackwell, vol. 18(1), pages 59-72, February.
    3. Dhamija, Nidhi, 2019. "Trade Liberalization and Unemployment in India: A State Level Analysis," MPRA Paper 95001, University Library of Munich, Germany.
    4. Chandan, Roy, 2016. "Inclusive trade in Indian silk industry during post globalized era," MPRA Paper 102322, University Library of Munich, Germany, revised Jan 2017.
    5. Devasmita Jena & Alokesh Barua, "undated". "Does Trade, Structural Transformation and Income Convergence: Empirical Evidence from the EU and the ASEAN," Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi Discussion Papers 18-04, Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi, India.
    6. Joshua AIZENMAN & Minsoo LEE & Donghyun PARK, 2012. "The Relationship between Structural Change and Inequality: A Conceptual Overview with Special Reference to Developing Asia," Working Papers DP-2012-13, Economic Research Institute for ASEAN and East Asia (ERIA).
    7. Chandan ROY, 2017. "The artisanal silk industry of West Bengal: A study of its history, performance and current problems," Turkish Economic Review, KSP Journals, vol. 4(4), pages 444-451, December.
    8. Naranpanawa, Athula & Arora, Rashmi, 2014. "Does Trade Liberalization Promote Regional Disparities? Evidence from a Multiregional CGE Model of India," World Development, Elsevier, vol. 64(C), pages 339-349.
    9. Dilip Saikia, 2011. "Does Economic Integration Affect Spatial Concentration of Industries? Theory and a Case Study for India," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 14(42), pages 89-114, December.
    10. Jena , Devasmita, 2021. "International Trade, Structural Transformation and Economic Catch-Up: An Analysis of The Asean Experiences," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 46(3), pages 135-155, September.
    11. Kadigi, Reuben M.J. & Robinson, Elizabeth & Szabo, Sylvia & Kangile, Joseph & Mgeni, Charles P. & De Maria, Marcello & Tsusaka, Takuji & Nhau, Brighton, 2022. "Revisiting the Solow-Swan model of income convergence in the context of coffee producing and re-exporting countries in the world," LSE Research Online Documents on Economics 115636, London School of Economics and Political Science, LSE Library.
    12. Sethi, Pradeepta & Bhattacharjee, Sankalpa & Chakrabarti, Debkumar & Tiwari, Chhavi, 2021. "The impact of globalization and financial development on India’s income inequality," Journal of Policy Modeling, Elsevier, vol. 43(3), pages 639-656.
    13. Naranpanawa, Athula & Arora, Rashmi, 2012. "Trade Liberalisation and Regional Disparities: Evidence from a Multi-Regional General Equilibrium Model of India," Conference papers 332270, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

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