Spatial Development and Agglomeration Economies in Services -- Lessons from India

88 Pages Posted: 19 Jul 2016

See all articles by Syed Ejaz Ghani

Syed Ejaz Ghani

World Bank

Arti Grover Goswami

World Bank

William Kerr

Harvard University - Entrepreneurial Management Unit

Date Written: June 30, 2016

Abstract

Although many studies consider the spatial pattern of manufacturing plants in developing countries, the role of services as a driver of urbanization and structural transformation is still not well understood. Using establishment level data from India, this paper helps narrow this gap by comparing and contrasting the spatial development of services with that in manufacturing. The study during the 2001-2010 period suggests that (i) services are more urbanized than manufacturing and are moving toward the urban and, by contrast, the organized manufacturing sector is moving away from urban cores to the rural periphery; (ii) manufacturing and services activities are highly correlated in spatial terms and exhibit a high degree of concentration in just a few states and industries; (iii) manufacturing in urban districts has a stronger tendency to locate closer to larger cities relative to services activity; (iv) infrastructure has a significant effect on manufacturing output, while human capital matters more for services activity; and lastly, (v) technology penetration, measured by the penetration of the Internet, is more strongly associated with services than manufacturing. Similar results hold when growth in activity is measured over the study period rather than levels. Manufacturing and services do not appear to crowd each other out of local areas.

Keywords: Economic Theory & Research, Industrial Economics, Economic Growth

Suggested Citation

Ghani, Ejaz and Goswami, Arti Grover and Kerr, William R., Spatial Development and Agglomeration Economies in Services -- Lessons from India (June 30, 2016). World Bank Policy Research Working Paper No. 7741. Available at SSRN: https://ssrn.com/abstract=2811389

Ejaz Ghani (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Arti Grover Goswami

World Bank ( email )

1818 H Street NW
Washington, DC 20433
United States

William R. Kerr

Harvard University - Entrepreneurial Management Unit ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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