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Is India’s Manufacturing Sector Moving Away From Cities?

Ejaz Ghani (), Arti Grover () and William Kerr ()

No 12-090, Harvard Business School Working Papers from Harvard Business School

Abstract: This paper investigates the urbanization of the Indian manufacturing sector by combining enterprise data from formal and informal sectors. We find that plants in the formal sector are moving away from urban and into rural locations, while the informal sector is moving from rural to urban locations. While the secular trend for India's manufacturing urbanization has slowed down, the localized importance of education and infrastructure have not. Our results suggest that districts with better education and infrastructure have experienced a faster pace of urbanization, although higher urban-rural cost ratios cause movement out of urban areas. This process is associated with improvements in the spatial allocation of plants across urban and rural locations. Spatial location of plants has implications for policy on investments in education, infrastructure, and the livability of cities. The high share of urbanization occurring in the informal sector suggests that urbanization policies that contain inclusionary approaches may be more successful in promoting local development and managing its strains than those focused only on the formal sector.

Keywords: Urbanization; structural transformation; transition; development; manufacturing; agglomeration; industrialization; growth; India. (search for similar items in EconPapers)
JEL-codes: J61 L10 L60 O10 O14 O17 R11 R12 R13 R14 R23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-iue and nep-ure
Date: 2012-04
References: View references in EconPapers View complete reference list from CitEc
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