Industry and the Urge to Cluster: A Study of the Informal Sector in India

Megha Mukim

SERC Discussion Papers from Centre for Economic Performance, LSE

Abstract: This paper studies the determinants of firm location choice at the district-level in India to gauge the relative importance of agglomeration economies vis-à-vis good business environment. A peculiar characteristic of the Indian economy is that the unorganised nonfarm sector accounts for 43.2% of NDP and employs 71.6% of the total workforce. I analyse National Sample Survey data that covers over 4.4 million firms, in both unorganised sectors - manufacturing and services. The empirical analysis is carried out using count models, and I instrument with land revenue institutions to deal with possible endogeneity bias. I find that buyer-suppler linkages and industrial diversity make a district more attractive to economic activity, whilst the quality and level of infrastructure are also important. I conclude that public policy may be limited in its ability to encourage relocation of informal firms.

Keywords: Agglomeration economies; informal sector; location choice (search for similar items in EconPapers)
JEL-codes: O17 R12 R3 (search for similar items in EconPapers)
Date: 2011-03
New Economics Papers: this item is included in nep-cse, nep-dev, nep-geo and nep-ure
References: View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Related works:
Working Paper: Industry and the urge to cluster: a study of the informal sector in India (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:sercdp:0072

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