Essays on geographical concentration and coagglomeration patterns of Indian manufacturing and service industries

Abstract

The geographical concentration of firms is a phenomenon that is ubiquitous across the world. The study of geographical concentration is essential due to its notable impact on economic production and employment growth, rendering it pertinent within regional policy. Two distinct lines of research have surfaced: one that seeks to measure and assess regional concentration patterns and another that aims to comprehend the factors influencing these patterns. Both strands of study pose issues relevant to policy and provide specific results. The thesis incorporates both lines of inquiry in the Indian setting, particularly in manufacturing and services industries at the district level . This study assesses the geographical concentration and coagglomeration patterns of Indian manufacturing and service industries. Our research utilizes the district as the spatial unit and the establishment as the economic unit. This thesis examines the impact of the neighbourhood effect on the spatial clustering of Indian manufacturing and service enterprises at the district level, utilizing data from the 2013-14 Economic Census. The study employed Guimaraes et al.'s (2011) Spatially weighted Ellison Glaeser index to account for the impact of neighbouring areas when assessing the level of geographic concentration of industries. This index can correctly quantify industry concentration based on the availability of area or lattice data. Two spatial frameworks are employed to analyze the impact of the neighbourhood. A geographical framework is used to evaluate the concentration of industries at the district level in all 636 districts throughout 34 Indian states and union territories. A different spatial methodology analyzes the level of industry concentration in 29 neighbouring Indian states by utilizing data at the district level. The initial spatial configuration disregards the influence of neighbouring factors, but the second configuration incorporates them. Using a spatially weighted Ellison Glaeser index provides a more accurate representation of neighbourhood impacts on the concentration of manufacturing and service industry concentration within Indian states. The results suggest that Indian policymakers adopt a differentiated approach to industries in different Indian states, considering the potential spatial spillover effects between districts. It incentivizes other establishments to locate near these districts, thus positively impacting regional economic growth. This finding suggests that the spatial economy and the geographical impact of government actions in the manufacturing and service sector require careful attention. Other empirical results suggest that input-output linkages and labour market pooling foster manufacturing and service industry coagglomeration among the Marshallian forces. Industrial diversity increases with coagglomeration. However, this diversification in industries generates employment opportunities. Therefore, a horizontal policy focusing on specific locations can promote comprehensive regional economic development. An 'agglomeration-focused approach' helps raise the productivity curve and lowers the cost curve through centripetal forces. These forces encompass various aspects, such as improving power, gas, steam, air conditioning, and water supply infrastructure. Additionally, enhancing educational institutions, providing better amenities, and developing housing options are all employed to attract qualified labour and entrepreneurs. By doing so, policymakers can increase the likelihood of facilitating the emergence of advantageous clusters influenced by local strengths and agglomeration forces.