Nation of Beancounters

Crowding in investment in India

Posted in Indian Variables by Navin Kumar on March 28, 2012

…if per capita developmental expenditure rises by 1%, investment can go up by 0.37 to 0.63%

From Mitra and Ural’s excellent paper Indian Manufacturing: A Slow Sector in a Rapidly Growing Economy. They look at the impact of reducing protection, inflexible labour markets and state developmental expenditure on things like productivity, employment and investment. It also contains the line:

Investment is about 40 to 80% higher in a flexible labour market state as compared to a similar state with a rigid labour market.

*expenditure by state governments on health, education, infrastructure etc


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