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LATEST NEWS UPDATES | What Surjit Bhalla got wrong about our study on spatial inequality in India -Vivek Dehejia

What Surjit Bhalla got wrong about our study on spatial inequality in India -Vivek Dehejia

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published Published on Aug 21, 2018   modified Modified on Aug 21, 2018
-ThePrint.in

Three richest states in India are three times as rich as three poorest, which is why we can’t ignore spatial inequality.

In a recent review of James Crabtree’s new book, The Billionaire Raj, also reviewed by me, columnist and part-time member of PM Modi’s Economic Advisory Council, Surjit Bhalla, pays my co-author, political economist and presently data guru for the Indian National Congress, Praveen Chakravarty, the following compliment: “In a much cited paper by Praveen Chakravarty and Vivek Dehejia (‘India’s Curious Case of Economic Divergence’) — Crabtree cites it approvingly as well — the authors contend that unlike other countries, India displays a divergence over time.” Unfortunately, much of the rest of what he says about our argument is tendentious or plain wrong.

Our 2016 briefing paper that Crabtree and he cited, along with our subsequent writings in Economic & Political Weekly, and elsewhere, argue that India has been witnessing a skyrocketing spatial divergence of income per person — in particular, both between major states, and within them. Our empirical work uses standard and publicly available data on state-level income, as well as a novel data set that we developed at the IDFC Institute using nightlights luminosity as the first-order proxy for economic activity. Our headline finding is that the three richest states are three times as rich as the three poorest, clearly making India an outliner amongst major federal economic zones in the world.

Our peer-reviewed research clearly demonstrates the fact of increasing spatial inequality in India, an observation which may or not coincide with increasing inter-personal inequality, in the sense of Thomas Piketty, which seems to be Bhalla’s main bugbear. Unfortunately, in attempting to rebut our research, Bhalla seems to demonstrate a fundamental lack of understanding of our claim, as he tediously invokes the low R-squared (or “goodness of fit”) of our “beta convergence” regressions.

To restate our claim: we argue that the “null hypothesis” of income convergence among major states is not supported by the data. And, paradoxically, the low R-squared in these regressions for India works in our favour and against Bhalla. He needs to prove that convergence is occurring; we just need to show that it is not proven — so states are diverging, at worst, or not converging, at best, neither of which fits the conventional narrative.

What is more, Bhalla more or less entirely ignores our results on “sigma convergence” — which measures the variation in income per person among states at a point in time — which is  a population-level statistic that is simply computed from data, to which no regression is attached, and hence no corresponding R-squared is required nor is offered. Given his statistical acumen, this is a puzzling misunderstanding by Bhalla.

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ThePrint.in, 18 August, 2018, https://theprint.in/opinion/what-surjit-bhalla-got-wrong-about-our-study-on-spatial-inequality-in-india/100396/


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