How Does Structural Reform Affect Regional Development? Resolving Contradictory Theory with Evidence from India

* The author gratefully acknowledges funding from the National Science Foundation (NSF SBR 9618343) for making this research possible. Thanks are also due to Temple University for granting a study leave, to Bruce Boucek for research assistance, and to the many individuals and institutions in India who gave of their time. The views expressed are the author’s alone.

Abstract

Regional theory offers little coherent guidance on the prospects for interregional development after structural reform in developing nations. In this paper I suggest a basic set of hypotheses in which the neoliberal nation-state is simultaneously a reduced state (less concerned about promoting regional balance) and an enlarged state (directing development toward selected regions). Under the new regulatory structure the location of post-reform investments may be expected to favor the coast, advanced regions, and existing metropolises (especially the edge areas); these expectations may be more true for foreign direct investments than domestic investments (especially the direct investments of the state). I use disaggregated pre- and post-reform industrial data from India to test the hypotheses. The results offer partial to full support for all hypotheses, providing evidence of the return of cumulative causation, and raising concerns about the political economy of future development in the lagging regions.

• structural reform
• regional development
• regional theory
• industrial location
• India

Notes

* The author gratefully acknowledges funding from the National Science Foundation (NSF SBR 9618343) for making this research possible. Thanks are also due to Temple University for granting a study leave, to Bruce Boucek for research assistance, and to the many individuals and institutions in India who gave of their time. The views expressed are the author’s alone.