Cross-Country Differentials in Economic Growth and Inequality in South Asia

Abstract

This paper intends to investigate the proximate explanatory factors behind the crosscountry differentials in the growth rates and the various dimensions of inequalities in the south Asian (S.A.) region since 1965 by using both the cross-country regression technique and the panel data approach . We find that in spite of the inheritance of some structural constraints as an outcome of the imperialistic exploitation and also the presence of some country specific constraining factors, most of the countries in the S.A.region have been able to achieve high rates of growth of both the real GDP and PCI especially in the 90s with slightly declining tendency in the cross-country inequalities but increasing tendency of intra-country inequalities. The cross-country and cross-time variations in the country specific factors and the cross-time variations in the effect of the investment, health and education capital are more important for the differentials in the level and the inter-temporal growth rates of per-capita income in this region. Since in most of the cases of our panel regression results it is found that the effect of the human capital more than offsets that of physical capital and further since the growth accounting exercise reveals that the contribution of Solow residual to the productivity growth has declined and that of education capital has increased in the 90s, one can plausibly conclude that the individual nation states of this region must play a crucial role through massive public investment in boosting the social sector development even under the on-going process of globalization. JEL Classification No: O 41, O 47, O 57.