We observe, more often than not, large differences between the incomes of different regions within the same country. The same is observed even between towns within a state, districts within a city, areas within district and so on and so forth. While reasons for such differences are more obvious at national and sub national levels, they become more complex as and when we get to smaller and smaller zones. This has caught the attention of many in the past and has generated enormous amounts of literature. Most theories have sought the help of ‘economic geography’ and its diversity to explain such incomes differences. We shall try and look at some of these explanations in the context of regional development.
An attempt to explain regional differences takes us back to the early 1900’s when sub-national and regional issues began to assume greater importance . Historically, the state had been instrumental in shaping up the geography of regions in the developing world. The era of the late 1900’s saw a paradigm shift when the state settled down to play less of an interventionist role, with more freedom handed over to the free market forces in the economy. Chakravorty (2000) employs this paradigm shift in explaining the regional development theory in the pre-reform and the post-reform era.
1) Cumulative Causation by Myrdal (1957) and Kaldor (1960)
The concept of cumulative causation simply means whatever happens in the past, continues into the future. In other words, a few historical events set a momentum for a certain phenomenon to continue into the future. For instance, the location of a new factory in the region will attract more investment and more employment in that factory and in ancillary and service industries in the area, and have a better infrastructure which would, in turn, attract more industry.
Myrdal (1957) and Kaldor (1960) took a pessimistic stand and said that regional imbalances will tend to widen in the absence of state intervention, where ‘such intervention is politically necessary and inevitable and improves the distribution of welfare.’ Such a theory can also be seen prevalent in the works of Datt and Ravallion (2002) which tries to examine if or not India’s economic growth is generated only by a few regions within India while others are left way behind in the development path.
2) Core-Periphery Models by Hirchman (1958) and Friedmann (1966)
This school of thought explained the ‘trickledown effect’ which means that the benefits of any policy or policy reform will benefit the richest in the initial stages, but eventually the perks tend to trickle down to the base of the pyramid, thus benefitting the broad population. The core-periphery model maintains its stance (Chakravorty 2002) on such a line of thought and places at the core, ‘the locus of change, where new ideas, technology, and capital intersect to generate economic change and cultural dynamism, while the non metropolitan periphery initially falls...