Demand linkages and spatial agglomeration of Indian states

Andrzej Cieślik and Sadananda Prusty

No 2011-04, Working Papers from Faculty of Economic Sciences, University of Warsaw

Abstract: In this paper, we examine the spatial relationship between wages and consumer purchasing power across Indian states to see whether regional demand linkages contribute to spatial agglomeration. We estimate a variety of the market-potential functions derived from the Harris model as well as more recent models of the New Economic Geography. Besides market-potential, we consider housing stock, density of roadways, density of telecom, and dummies to capture cyclical fluctuations as parameters of consumer purchasing power and demand to explore the importance of scale economies and transport costs. The estimation results suggest that all the above factors influence demand linkages between states, which are strong and growing over the period from 1999-2000 to 2007-2008.

Keywords: Spatial agglomeration; Scale economies; Wage differentials; Regional studies (search for similar items in EconPapers)
JEL-codes: F12 J31 P48 R12 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2011
New Economics Papers: this item is included in nep-geo and nep-ure
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http://www.wne.uw.edu.pl/inf/wyd/WP/WNE_WP44.pdf First version, 2011 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:war:wpaper:2011-04

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