Growth, Inequality, and Poverty: Prospects for Pro-Poor Economic Development

By Anthony Shorrocks; Rolph Van Der Hoeven | Go to book overview

9.6 CONCLUSION

This study has examined the convergence of growth and incomes with reference to the Indian states using an empirical model of dynamically evolving distributions. The model reveals 'twin peaks' dynamics, or polarization across the Indian states, over 1965-97—empirics which would not be revealed under standard methods of cross-sectional, panel data, and time series econometrics. The dominant cross-state income dynamics is found to be associated with persistence, immobility, and polarization, with some cohesive tendencies in the 1960s, which dissipate over the following three decades. These findings contrast starkly with those emphasized in works of Aiyar (2000), Bajpai and Sachs (1996), Nagaraj et al. (1998), and Rao, Shand and Kalirajan (1999).

A conditioning methodology using the same empirical tools further reveals that such income dynamics are explained by the disparate distribution of infrastructure and to an extent by fiscal deficit and capital expenditure patterns. Unlike standard methods, this model allows us to observe the income dynamics at different levels of the distribution. Infrastructure explains the formation of the lower convergence club, while fiscal deficits and capital expenditure patterns explains club formation at higher income levels. By helping to uncover the forces which govern growth dynamics across the Indian states, such stylized facts are interesting for policy purposes.


REFERENCES

Adelman, I. and Morris, C. T. (1967). Society, Politics and Economic Development—A Quantitative Approach. Johns Hopkins Press, Baltimore.

Aiyar, S. (2000). 'Growth Theory and Convergence Across Indian States: A Panel Study'. In T. Callen, P. Reynolds, and C. Towe (eds), India at the Crossroads: Sustaining Growth and Reducing Poverty. IMF, Washington.

Bajpai, N. and Sachs, J. D. (1996). 'Trends in Interstate Inequalities of Income in India' HIID Discussion Papers 528, Harvard Institute for International Development, Cambridge, MA.

Bandyopadhyay, S. (2000a). 'Regional Distribution Dynamics of GDPs Across Indian States, 1965-1988'. London School of Economics Working Paper Series 00/06. LSE Development Studies Institute, London.

—— (2000b). 'Explaining Regional Distribution Dynamics of GDPs Across Indian States, 1977-1993'. London School of Economics. Unpublished manuscript.

Barro, R. J. (1995). 'Inflation and Growth', NBER Working Papers 5326. National Bureau of Economic Research, Cambridge, MA.

—— and Sala-i-Martin, X. (1992). 'Convergence'. Journal of Political Economy, 100(2), 223-51.

Bernard, A. and Durlauf, S. (1994). 'Interpreting Tests of the Convergence Hypothesis'. NBER Technical Working Papers 159. National Bureau of Economic Research, Cambridge, MA.

—— and —— (1996). 'Interpreting Tests of the Convergence Hypothesis', Journal of Econometrics, 71(1-2), 161-74.

Bianchi, M. (1997). 'Testing for Convergence: Evidence from Non-Parametric Multimodality Tests'. Journal of Applied Econometrics, 12(4), 393-409.

Bruno, W. and Easterly, W. (1998). 'Inflation Crises and Long-run Growth'. Journal of Monetary Economics, 41(1), 3-26.

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Growth, Inequality, and Poverty: Prospects for Pro-Poor Economic Development
Table of contents

Table of contents

  • Unu World Institute for Development Economics Research (Unu/Wider) ii
  • Growth, Inequality, and Poverty iii
  • Contents v
  • List of Figures vii
  • List of Tables ix
  • List of Acronyms and Abbreviations xi
  • List of Contributors xiii
  • Acknowledgements xvi
  • Introduction 1
  • References 12
  • 1: Economic Policy, Distribution, and Poverty 13
  • References 28
  • Appendix 57
  • References 59
  • 3: Growth, Inequality, and Poverty 62
  • 4: The Growth Elasticity of Poverty 81
  • Appendix 102
  • References 105
  • 6: Growth, Distribution, and Poverty Reduction 107
  • References 123
  • Appendix: Method and Sources 149
  • References 151
  • References 175
  • 9: Twin Peaks 176
  • 9.6 Conclusion 194
  • 10: A Decomposition of Inequality and Poverty Changes in the Context of Macroeconomic Adjustment 197
  • References 220
  • References 249
  • References 271
  • Index 277
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