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  • 2012
  • Working Paper
  • HBS Working Paper Series

Is India's Manufacturing Sector Moving Away from Cities?

By: Ejaz Ghani, Arti Grover Goswami and William R. Kerr
  • Format:Print
  • | Language:English
  • | Pages:42
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Abstract

This paper investigates the urbanization of the Indian manufacturing sector by combining enterprise data from formal and informal sectors. We find that plants in the formal sector are moving away from urban and into rural locations, while the informal sector is moving from rural to urban locations. While the secular trend for India's manufacturing urbanization has slowed down, the localized importance of education and infrastructure have not. Our results suggest that districts with better education and infrastructure have experienced a faster pace of urbanization, although higher urban-rural cost ratios cause movement out of urban areas. This process is associated with improvements in the spatial allocation of plants across urban and rural locations. Spatial location of plants has implications for policy on investments in education, infrastructure, and the livability of cities. The high share of urbanization occurring in the informal sector suggests that urbanization policies that contain inclusionary approaches may be more successful in promoting local development and managing its strains than those focused only on the formal sector.

Keywords

Urban Development; Policy; Factories, Labs, and Plants; Geographic Location; Education; Infrastructure; Manufacturing Industry; India

Citation

Ghani, Ejaz, Arti Grover Goswami, and William R. Kerr. "Is India's Manufacturing Sector Moving Away from Cities?" Harvard Business School Working Paper, No. 12-090, April 2012.
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About The Author

William R. Kerr

Entrepreneurial Management
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