Long-Run Growth Trends and Convergence Across Indian States: The Role of Infrastructures
Résumé
This paper examines the growth performance of Indian States during 1970–94. We, first, assess the contribution of differences in the availability of physical, social, and economic infrastructure to growth performance. Our estimations account for reverse causality arising from the endogeneity of infrastructure investment. Then, combining principal components analysis and panel data estimation techniques, we provide more accurate estimates of the growth impact of specific types of infrastructure. In particular, we highlight the strong impact of primary education, health conditions, irrigation, roads and rail network, power capacities, and financial development. Moreover, we do find evidence of conditional convergence across States. This does not rule out persistent income inequalities due to the dispersion of steady‐state income levels. Such disparities are accounted for by differences, first, in the structure of production, second, in infrastructure endowments, and, third, in State‐specific fixed effects in the growth regression. Copyright © 2000 John Wiley & Sons, Ltd.