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On the Convergence Puzzle
While there is no disagreement that widening regional disparities is an empirical fact and a major developmental concern, the inference drawn in Prerna Sanga and Abdul Shaban (“Regional Divergence and Inequalities in India,”EPW, 7 January 2017) on convergence is misleading, and disregards conceptual underpinnings.
The neoclassical theory of convergence stems from exogenous growth model pioneered by Robert Solow and Trevor Swan in 1956. The first empirical study advocating unconditional convergence between 16 OECD (Organisation for Economic Co-operation and Development) countries was attempted by William Baumol in 1986. With rapid systemic improvements in the availability of macroeconomic data, econometric analysis of convergence has ever since been a much researched issue in growth economics (Sala-i-Martin 1996). However, there is a plethora of literature reflecting exasperatingly different interpretations of both the theory and the empirics of convergence (Islam 2003). Apparently, in many ways, it is now a litmus test to check the validity of neoclassical growth theories.
In this regard, it was invigorating to come across the article by Prerna Sanga and Abdul Shaban titled, “Regional Divergence and Inequalities in India” published inEPW (7 January 2017). The authors use spatial dependence model to test convergence (or divergence) in per capita incomes across major Indian states and conclude that their findings
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