Club-Convergence and Polarisation of States A Nonparametric Analysis of Post-Reform India

The objective of this paper is to study the dynamics of the distribution of regional per capita income of Indian states in the post reform period, in order to identify trends towards convergence-club formation, polarisation or stratifcation during this period. The ‘distribution dynamics’ framework is being adopted that uses kernel density estimates, stochastic kernels and ergodic distributions in order to identify these trends. The results show that there is polarisation in India in the post-reform period and this is due to the contrary growth dynamics of the middle income states resulting in the ‘vanishing middle’ of the relative income distribution. Since polarisation increases the possibility of confict, this study highlights one of the undesirable consequences of the current growth process in India. [IEG Working Paper No. 307] URL: [http://www.iegindia.org/]