Sub-National Growth Dynamics: Insights from Macro-GDP and Micro-Survey Data

Binayak Sen

December 12, 2005

Motivation for the PaperSome Stylized FactsAcceleration of Growth in the 1990s (and beyond) compared to 1980sPronounced rise in inequalityConsiderable progress in poverty, human development and social indicatorsWeak 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 DifferencesConsiderable regional concentration in income/ expenditureDhaka/ CTG Division55-60% of total GDP and Survey ExpenditureDhaka/ CTG Region30% of total GDP and Survey ExpenditureConsiderable regional variation in growth

Regional Growth Differences

Table 3: Per Capita GDP Growth Performance by Region during 1980s and 1990s

District

Annual Per Capita GDP Growth

(1982-92)

Annual Per Capita GDP Growth

(1992-99)

Dhaka

1.68

3.68

Mymensingh

1.31

2.71

Jamalpur

.83

1.13

Tangail

.38

2.65

Faridpur

3.32

2.29

Chittagong

2.35

3.23

Ctg. Hill Tract

-2.00

4.07

Noakhali

1.82

2.88

Comilla

2.69

3.01

Sylhet

1.02

2.53

Rajshahi

2.54

1.61

Dinajpur

2.17

2.05

Rangpur

2.31

1.94

Bogra

2.31

2.21

Pabna

1.10

2.38

Khulna

1.64

2.84

Barisal

2.25

2.23

Patuakhali

2.33

3.67

Jessore

3.89

2.58

Kushtia

3.76

2.57

Regional Growth Differences (2)

Table 2: Rank Comparison between Growth in Per Capita GDP and Consumption Expenditure during the 1990s

Region

Growth in Per Capita GDP Macrodata

Rank

Growth in Per Capita Consumption Expenditure Microdata

Rank

Dhaka

3.68

1

3.11

4

Mymensingh

2.71

6

1.09

13

Jamalpur

1.13

18

1.65

10

Tangail

2.65

7

3.45

1

Faridpur

2.29

12

2.13

5

Chittagong

3.23

2

0.98

14

Noakhali

2.88

4

1.87

8

Comilla

3.01

3

3.29

2

Sylhet

2.53

10

-0.12

15

Rajshahi

1.61

17

1.58

11

Dinajpur

2.05

15

-1.58

17

Rangpur

1.94

16

-1.03

16

Bogra

2.21

14

3.45

1

Pabna

2.38

11

2.04

6

Khulna

2.84

5

1.83

9

Barisal

2.23

13

3.15

3

Jessore

2.58

8

1.13

12

Kushtia

2.57

9

1.94

7

Regional Growth Differences (3)

Table 5: District Variation in Per Capita Expenditure Growth, 1991/92-2000

Annual Growth Rates

Frequency

Percent

Negative growth

13

21.3

Less than 1%

12

19.7

Less than 2%

11

18.0

Less than 3%

10

16.4

3% and More

15

24.6

Total

61

100.0

Negative Growth

Less than 1%

Less than 2%

Less than 3%

3% and More

Nilphamari

Munshiganj

Rajshahi

Brahmanbaria

Narsingdi

Thakurgaon

Sylhet

Cox's Bazar

Lalmonirhat

Barishal

Panchagarh

Madaripur

Magura

Sirajganj

Jhalokati

Kushtia

Maulvibazar

Gopalganj

Dhaka

Bagerhat

Mymensingh

Shariatpur

Pirojpur

Barguna

Tangail

Habiganj

Sunamganj

Pabna

Natore

Rajbari

Joypurhat

Jessore

Noakhali

Feni

Faridpur

Manikganj

Gaibandha

Jamalpur

Jhenaidah

Comilla

Chuadanga

Naogaon

Lakshmipur

Nawabganj

Narayanganj

Meherpur

Kurigram

Kishoreganj

Chandpur

Bogra

Narail

Khulna

Satkhira

Netrokona

Rangpur

Chittagong

Bhola

Dinajpur

Sherpur

Gazipur

Patuakhali

What Explains the Regional Growth Variation?Possible Key Factors

Human Capital: +veInitial Income (Expenditure) Inequality: -veUrbanization: +veAgricultural Technology: +veGender Inequality: -veLarge 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 predictionsRegional growth convergence (both conditional and unconditional)yesHowever, (a) the speed of convergence is very slow, (b) the trend can change if inequality is not addressed

Results of Multivariate Analysis

Table 10: Determinants of Regional Growth: 64-Districts Data

Independent Variables

Regression Coefficient

Regression Coefficient

Regression Coefficient

Regression Coefficient

Regression Coefficient

Regression Coefficient

Regression Coefficient

Constant

.374

(3.40)*

.472

(4.42)*

.632

(5.53)*

.630

(5.65)*

.649

(5.90)*

.738

(6.69)*

.737

(6.64)*

Natural log of initial level of district expenditure, 1991

-.044

(-3.27)*

-.061

(-4.48)*

-.080

(-5.57)*

-.078

(-5.57)*

-.082

(-5.98)*

-.096

(-6.78)*

-.095

(-6.68)*

Adult Literacy Rate, 1991: Both sexes

.108

(3.23)*

.075

(2.25)**

.070

(2.13)**

.081

(2.14)**

.102

(2.74)*

.099

(2.68)*

Urban Population Share, 1991

.069

(2.92)*

.081

(3.42)*

.069

(2.71)*

.072

(2.95)*

.067

(2.69)*

Initial Expenditure Inequality, 1991

-.130

(-2.03)**

-.129

(-1.93)***

-.125

(-1.95)***

-.130

(-2.00)***

% Area under Large Farm, 1984

.150

(0.831)

.237

(1.33)

.282

(1.49)

Share of Irrigated Land, 1984

.088

(1.86)***

.098

(2.14)**

.113

(2.40)**

Interaction between Irrigated Land and Share of Large Farm-holdings, 1984

-1.231

(-1.88)***

-1.423

(-2.23)**

-1.568-(2.41)**

Change in Infant Mortality Rate over 1991-00

.029

(2.13)**

.031

(2.28)**

Male Advantage in Attendance Rate 5-24, 1991

-.019

(-1.59)

Adjusted R Square

0.139

0.257

0.343

0.377

0.410

0.470

0.481

Note: Dependent Variable: annual Per capita District Consumption Expenditure Growth over 1991/92-2000. Figures in parentheses represent T-ratios.

* Significant at 1% level ** Significant at 5% level *** Significant at 10% level

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

Table 9: Between and Within-Group Decomposition of Theil Index of Inequality at District-Level, 1991/92-2000

Level of Decomposition: 64-District

1991/92

2000

Number of Sub-Groups

61

63

Within-Group Inequality

0.1084 (84.6%)

0.1562 (82.8%)

Between-Group Inequality

0.0197 (15.4%)

0.0325 (17.2%)

Total Inequality

0.1281 (100%)

0.1887 (100%)

Note: Figures in parentheses represent percentage contribution of each component of inequality to total inequality.

New Growth AgendaHuman 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 potentialsChanging fortunes of district townsUnderstanding dynamics of meso-economy

New Growth Agenda (3)Initial income inequality depresses growthAddressing new sources of income inequality:

Land vs. non-land sources

New Growth Agenda (4)Inclusion of missing factors for future analysis:

InfrastructureAccess to financeRegional governance

Need for periodic regional data