Sub-National Growth Dynamics: Insights from Macro-GDP and Micro-Survey Data Binayak Sen December 12, 2005

Motivation for the Paper Some Stylized Facts Acceleration of Growth in the 1990s (and beyond) compared to 1980s Pronounced rise in inequality Considerable progress in poverty, human development and social indicators Weak sign of “social convergence”

Motivation for the Paper (2) What is the sub-national story underlying the growth dynamics? How different are regional growth rates? Has spatial inequality become sharper? Any sign for “regional growth convergence”? What lessons from sub-national data for future national growth? Is there a role for “regional policy”?

What is “sub-national” level? Spatial differences across division (6), region (20 “old” districts), new district (64) Data Source: macro-GDP by region; micro-expenditure by region and district; census information on district

Considerable Regional Differences Considerable regional concentration in income/ expenditure Dhaka/ CTG Division—55-60% of total GDP and Survey Expenditure Dhaka/ CTG Region—30% of total GDP and Survey Expenditure Considerable regional variation in growth

Regional Growth Differences

Regional Growth Differences (2)

Regional Growth Differences (3)

What Explains the Regional Growth Variation? Possible Key Factors Human Capital: +ve Initial Income (Expenditure) Inequality: -ve Urbanization: +ve Agricultural Technology: +ve Gender Inequality: -ve Large Landholding: + or -?

Human Capital and Growth

Human Capital and Growth (2)

Human Capital and Growth (3)

Gender Inequality and Growth

Gender Inequality and Growth (2)

Initial Expenditure Inequality and Growth

Large Landholding and Growth

What Explains the Regional Growth Variation? (2) Results of multivariate analysis confirmed the predictions Regional growth convergence (both conditional and unconditional)—yes However, (a) the “speed of convergence” is very slow, (b) the trend can change if “inequality” is not addressed

Results of Multivariate Analysis

What Matters Most: Within-Region or Between-Region Inequality? Total inequality (i.e. inequality in inter-personal income) is mainly explained by within-region inequality Sharp rise in within-region inequality; slight increase in between-region inequality Consistency with regional growth convergence

New Growth Agenda Human capital requirements vary with stages of development: Confronting new challenges Rethinking “new technology” in the phase of agricultural diversification

New Growth Agenda (2) Urban Futures: Putting “urban” on the growth agenda: Tapping mega-city potentials Changing fortunes of district towns Understanding dynamics of “meso-economy”

New Growth Agenda (3) Initial income inequality depresses growth Addressing new sources of income inequality: Land vs. non-land sources

New Growth Agenda (4) Inclusion of “missing factors” for future analysis: Infrastructure Access to finance Regional governance Need for periodic regional data