Essays on Economic Growth In India

Abstract

This dissertation comprises of three distinct studies that contribute to the field of economic growth in India. First, we investigate patterns of growth at the district level (second level administrative units) using radiance calibrated night lights data for 2000-2010. We examine growth both at the aggregated district level, as well as along the rural and urban dimensions. We find evidence of both absolute and conditional convergence, with convergence among rural areas being the primary driver. However, there is no evidence of convergence among urban areas. Moving further along similar lines, we explore the effect of credit shocks, generated by scheduled commercial banks, on economic growth in districts of India during the years 2000-2010. We exploit the variation in the initial sectoral credit shares to predict the district level credit supply shock using a shift share instrument. We find a strong association between credit growth and growth in economic activity, but when controlled for the district specific demand shocks, the predicted supply shock effect fails to be statistically significant. Lastly, we study distortions in input and output markets as the sources of misallocation in the Indian manufacturing sector, using data from both formal and informal firms. We consider output, capital, raw material, energy, and service sector distortions in a monopolistically competitive framework to measure the aggregate dispersion in total factor revenue productivity (TFPR). Decomposing the variance in TFPR, we show that the raw material and output distortions play the major role in defining aggregate misallocation.