Economic Geography of Industrial Location: Evidence from Indian States

Using state-industry data for 1981-98, the paper examines the Rajan-Zingales (1998) hypothesis at the country level. In particular, we examine whether industrial characteristics influence state-level industrial growth. The findings suggest that industries with higher fixed capital and bigger factory sizes tend to grow slower in states with lower penetration of banking. More importantly, the findings testify that financial development of states tends to overwhelm their financial structure in influencing industrial growth.