Is the Elephant Stepping on its Trunk? The Problem of India's Unbalanced Growth

Robin Douhan and Anders Nordberg ()
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Anders Nordberg: Uppsala University, Postal: Department of Economics, P.O. Box Box 513, SE-751 20 Uppsala, Sweden

No 778, Working Paper Series from Research Institute of Industrial Economics

Abstract: It is often assumed that recent success in the high-technology software industry will lead India's development. However, evidence suggest that basic manufacturing industry is stagnant. This paper proposes a mechanism that ties these two trends together. A big-push type of model, featuring linkages between firms, demand spill-over, and technology choice is elaborated. By imposing different cost structures on the manufacturing and high-technology industries the model describes outcome in terms of distribution between sectors. It is found that a policy which promotes a high-technology sector can have negative effects on the manufacturing industry as well as aggregate income. Directing resources towards infrastructure, on the other hand, benefits all sectors and increases aggregate income. The results from the model are found to correspond with the recent development pattern in India.

Keywords: Industrialization; India; Industrial Structure (search for similar items in EconPapers)
JEL-codes: L16 O14 O25 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2008-11-26
New Economics Papers: this item is included in nep-cwa
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Related works:
Working Paper: Is the elephant stepping on its trunk? The problem of India´s unbalanced growth (2007)
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