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8/13/2019 Lecture10 India February6th Short-clean(1)
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Indian Economy
Economic Growth Why did the economy liberalize? Why did the economy
takeoff?
Poverty and Well-Being How effectively has Economic Growth reduced poverty?
Why has poverty persisted in India despite electoralpressures on the government?
Regional Disparities Why do some states perform much better than others?
Using regional disparities to think about ComparativePolitics within India
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Has Indias Recent Economic Growth
been Effective at Reducing Poverty?
If you take the poverty line to be $1.25 a day (not$1), Indias poverty has declined about a thirdfrom 1983 to 2005
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Has Indias Recent Economic Growth
been Effective at Reducing Poverty?
If you take the poverty line to be $1.25 a day (not$1), Indias poverty has declined about a thirdfrom 1983 to 2005
During the same period and using the samemeasure,global poverty has declined by morethan half
=> Indias rate of poverty reduction falls short ofglobal standards
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Growth Poverty Elasticity
Indias economic growth has been higher thanmost countries in the 1980s and 1990s, but itspoverty reduction has been lower than theaverage country
Growth-Poverty Elasticity The amount thatpoverty reduces in response to a one unit
change in economic growth.
Why is Indias Growth-Poverty Elasticity so Low?
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Growth Poverty Elasticity
Economic growth may also change the distributionof income (i.e. income inequality)
The Total Income is Increasing
AND who gets the total income is also changing
So when thinking about how effective economicgrowth is in reducing poverty, we should considerwhat it does to the distribution of income
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Growth Poverty Elasticity
Counterfactual: If Economic Liberalization did notproduce changes in the distribution of income, howmuch would it have reduced poverty between 1993and 2005? (IMF paper by Topalova)
By 22% more than it did in rural areas By 76% more than it did in urban areas
h f
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Who gains from EconomicGrowth in Each Period?
(Rural India)
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
4
0 10 20 30 40 50 60 70 80 90
Rural India
19831993/94
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
4
0 10 20 30 40 50 60 70 80 90
Rural India
1993/942004/05
=> The Evidence shows that the worsening inequality emerged afterthe 1991-1992 Economic Liberalization Reforms
h i di h
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Why is Indias Growth-Poverty Elasticity so Low
in the 1990s? Initial inequalities in human development => Difficulty
taking advantage of new economic opportunities
Sectoral Composition of Growth Emphasis on ServiceSector, Urban Areas
C0mpare with patterns of growth in the 1970s and 1980smuch higher growth-poverty elasticity than in the 1990s
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Poverty Trends in India,China and Brazil
0
20
40
60
80
100
1980 1985 1990 1995 2000 2005
China
India
Brazil
Percentage of population living below $1.25 a day at 2005 PPP
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India vs. China and Brazil
China
Favorable pre-reform conditions in terms of lowerinequality of land and capital
Emphasis on reforms in Agriculture and RuralDevelopment
=> Led to more rapid decline in poverty (althoughGrowth has been accompanied by rising inequality)
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India vs. China and Brazil
Brazil
High initial inequality in assets
Relatively low economic growth
Heavy Redistribution and pro-poor policies
=> Less poverty, but much lower rates of povertydecline
E i Lib li i
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Economic Liberalizationand Poverty in India -
Summary Poverty has declined but not as much as one would
expect given high rates of growth in the 1990s
Inequality in initial conditions + EconomicLiberalization => Further Increase in Inequality
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What does India need todo to further reduce itspoverty in the future?
Development Schemes?
Reform Manufacturing Sector?
Reform Agricultural Sector?
POLITICALHURDLES
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Regional Disparities (literacy rates)
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Explaining RegionalDisparities
Initial Conditions
Geography
Colonial Legacies
Further Divergence
Central government distribution of resources tostates
Response to Economic Liberalization
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USING REGIONAL DIFFERENCES TO
UNDERSTAND THE CAUSES OF SOCIAL
DEVELOPMENT
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CONVENTIONAL WISDOM:
Effect of Democracy on Poverty
Median Voter Theorem
Politicians have an incentive to cater to the medianvoter who tends to be poor
+ Poorer voters will favor more pro-poor policies
=> Poorer voters will punish politicians (i.e. not re-elect
politicians) who do not implement pro-poor policies
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Developmental Success vs. Developmental Failure
within a Democracy
Kerala
UttarPradesh
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Social Spending:Kerala vs. Uttar Pradesh
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Explaining Differences in Development:
Kerala vs. Uttar Pradesh (Keefer and Khemani)
Initial Conditions of the Poor
Kerala: better initial literacy, higher politicalparticipation by the poor
U.P: lower literacy, active caste discrimination
Party Institutionalization
Kerala: Competition between the Congress and theCommunist Party (Institutionalized)
U.P.: Competition between Congress and Ethnic orPersonalistic Parties
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Lessons from Kerala vs. UPComparison
Given the median voter logic, why are democraciesnot better at reducing poverty?
Political Market Imperfections
Poor Information about Politicians Actions
Ethnic Voting
The Credibility of Promises and Clientelism
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Comparing Kerala overTime
Upto 1890s: Low Social Development
1890s to 1950: Increasing Social Development
1950s: High Social Development
What accounts for the difference in Time Period?
Advent of Christian Missionaries
Unifying subnational identity=> Cohesion along castelines => Introduction of Mass Health and EducationPrograms
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Evidence Using theComparative Method
Political science research involves addressing, eitherdirectly or indirectly, general causal questions
What is the effect of institutionalized parties on social
development? What is the effect of the Communist Party in India on
social development
Why do some places have higher levels of socialdevelopment than others?
What was a reason for Keralas developmental successrelative to other Indian states?
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Evidence Using theComparative Method
To address these questions, we start out with possibleargumentswhich enable us to identify several potential
causal factors
For the research paper, you will want
(1) to hone in on one of these possible arguments that youwill defendthrough the course of your paper.
(2) to hone in on one or more possible arguments that youwill control for or rule out. through the course ofyour paper
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Evidence Using the Comparative
Method: Case Selection
We use evidence from specific cases to shed light on thesebroader questions. But how do we select our cases?
Criteria 1: Generally, we want to select cases that havedisplay significant differences in the outcome we want toexplain E.g. Kerala and U.P. very different levels of social
development E.g. Kerala before 1890 vs. Kerala after 1950 very
different levels of social development
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Case Selection (continued)
Criteria 2: We also want the cases to be similar enough to enable us to
rule out at least one important potential causal factor
E.g. One potential explanation for why places have differentlevels of social development is the difference in the presence ofdemocratic elections.
So the presence of democratic elections cannot be the reasonwhy Kerala and U.P. have different levels of social development
Thus, by selecting cases in this way, we are able to rule out orcontrol for a causal factor which is the presence of democraticelections
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Evidence Using the Comparative
Method: Case Analysis
Once we select cases that share similarities in this way, we can thenhone in on some potential causal factors that are different across thesecases
E.g. Kerala and U.P. have
Different levels of social development (outcome) Similar presence of democratic elections (alternative
explanation)
Differences in the presence of institutionalized parties(potential causal factor 1)
Differences in the initial rates of literacy and politicalparticipation (potential causal factor 2)
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Announcements
Online Discussion Board on Connect
Group Session on February 11th
(Tuesday Next Week) If possible, bring laptops
Midterm on February 13
th
(Thursday Next Week) List of key terms will be posted on Connect
Term IDs
Other short answer questions