05-14-2005, 06:00 PM
A Tale of Two States
<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>Abstract</b>
In this paper we study the economic evolution between 1960 and 1995 of two states in India â Maharashtra and West Bengal. During this period West Bengal, which was one of the two richest states in India in 1960, has gone from a relative per capita income of about 100 percent of Maharashtra, to a relative income of around 60 percent. Our diagnostic analysis reveals that a large part of the blame for West Bengalâs development woes can be attributed to: (a) low aggregate productivity (b) poorly functioning labor markets and sectoral misallocations. We find that sectoral productivity and labor market allocation wedges were strongly correlated with political developments in West <b>Bengal, namely the increasing vote share of the leftist parties.</b><!--QuoteEnd--><!--QuoteEEnd-->
<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>Abstract</b>
In this paper we study the economic evolution between 1960 and 1995 of two states in India â Maharashtra and West Bengal. During this period West Bengal, which was one of the two richest states in India in 1960, has gone from a relative per capita income of about 100 percent of Maharashtra, to a relative income of around 60 percent. Our diagnostic analysis reveals that a large part of the blame for West Bengalâs development woes can be attributed to: (a) low aggregate productivity (b) poorly functioning labor markets and sectoral misallocations. We find that sectoral productivity and labor market allocation wedges were strongly correlated with political developments in West <b>Bengal, namely the increasing vote share of the leftist parties.</b><!--QuoteEnd--><!--QuoteEEnd-->