Thursday, April 25

Divergent Policies for Convergence Clubs: A Study of Post-Reform Indian States

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By Sabyasachi Kar & Debajit Jha

Working Paper No- 449

Should economies attempting to break out of low-growth convergence clubs adopt policies distinctly different from those in high-growth clubs? This paper proposes a framework that helps answer this question. To do this, we extend the logic of policy divergence from the growth transitions literature to the analysis of club convergence. We then test this framework by applying it to an analysis of regional growth in India in the postreform period. Our framework identifies sixteen sub-national regions in India belonging to two low-growth clubs that should focus on improving their investment climate. Another fifteen such regions from two high-growth clubs however, need urgent institutional reforms.”

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