Income convergence of Indian states in the post-reform period: evidence from panel stationarity tests with smooth structural breaks
Journal of the Asia Pacific Economy, vol.29, no.1, pp.424-441, 2024 (SSCI, Scopus)
- Publication Type: Article / Article
- Volume: 29 Issue: 1
- Publication Date: 2024
- Doi Number: 10.1080/13547860.2021.2022352
- Journal Name: Journal of the Asia Pacific Economy
- Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, Academic Search Premier, IBZ Online, International Bibliography of Social Sciences, ABI/INFORM, Business Source Elite, Business Source Premier, CAB Abstracts, EconLit, Geobase, Index Islamicus, PAIS International
- Page Numbers: pp.424-441
- Keywords: Income convergence, India, panel data, structural shifts
- Ankara Yıldırım Beyazıt University Affiliated: No
Abstract
This paper investigates income convergence of Indian states in the post-reform period when markets played a greater role in resource allocation. We analyze stochastic convergence of relative per capita incomes of 19 states for the period 1994–2018 by employing a recently developed panel data approach controlling for structural breaks as smooth shifts. Smooth shifts are modelled using a more flexible Fourier approach that does not require identifying the number, date, and form of breaks. The empirical results, contrary to recent empirical findings, do not support evidence in favour of convergence in per capita income among Indian states. Poor infrastructure, lack of adequate financial development, and weak governance structure coupled with low total factor productivity growth seem to be responsible for the divergence of income. The findings suggest that development intervention in the post-reform period has neither been of the required order nor in the desired direction to help the lagging states to catch up with the leading ones.