Working Paper: NBER ID: w17992
Authors: Ejaz Ghani; Arti Grover Goswami; William R. Kerr
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; manufacturing; India; education; infrastructure
JEL Codes: J61; L10; L60; O10; O14; O17; R11; R12; R13; R14; R23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| localized education (R53) | urbanization (R11) |
| infrastructure (H54) | urbanization (R11) |
| higher urban-rural cost ratios (R29) | urbanization (R11) |
| better education and infrastructure (I25) | faster pace of urbanization (R11) |
| formal sector's urban-rural cost dynamics (R29) | spatial allocation of manufacturing plants (R32) |
| high capital and land intensity (D29) | location in rural areas (R39) |