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Industrial Location and Spatial Inequality: Theory and Evidence from India
Author(s) -
Lall Somik Vinay,
Chakravorty Sanjoy
Publication year - 2005
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/j.1467-9361.2005.00263.x
Subject(s) - industrialisation , inequality , economic geography , economics , spatial inequality , secondary sector of the economy , diversity (politics) , economic inequality , economy , market economy , mathematical analysis , mathematics , sociology , anthropology
The authors argue that spatial inequality of industry location is a primary cause of spatial income inequality in developing nations. Their study focuses on understanding the process of spatial industrial variation: identifying the spatial factors that have cost implications for firms, and the factors that influence the location decisions of new industrial units. The analysis has two parts. First the authors examine the contribution of economic geography factors to the cost structure of firms in eight industry sectors and show that local industrial diversity is the one factor with significant and substantial cost‐reducing effects. They then show that new private sector industrial investments in India are biased toward existing industrial and coastal districts, whereas state industrial investments (in deep decline after structural reforms) are far less biased toward such districts. The authors conclude that structural reforms lead to increased spatial inequality in industrialization, and therefore, income.