The Allocative Efficiency of Land and Energy in India

Supply and allocation of energy and land are among the most important issues for the new government in pushing India’s growth forward. The process of urban transformation in India has been constrained by weak and imperfect land markets. Land acquisition is cited as a major obstacle for the development of factories, power plants, highways, mines, and townships. Similar challenges persist in the energy sector, where India is notorious for inadequate energy supply and frequent power failures. In light of these issues, this project aims to investigate the usage and allocation efficiency of land and energy within India, focusing principally on India’s formal and informal manufacturing sector.

This study will develop a comprehensive data platform to provide consistent metrics on energy and land usage. The data will then be utilized to study levels and trends in land and energy efficiency for India as a whole and across a number of traits such as urban vs. rural settings and industry differences to name a few. The project will also consider how the dynamics of spatial changes in Indian manufacturing shape efficiency considerations, and will evaluate the determinants of India’s misallocations.

The research team aim to broad our understanding of how access to critical inputs such as energy and land constrain growth in Indian manufacturing. Their micro-founded model, based on detailed establishment level data, allows for the study of the usage and misallocation in these key inputs on an individual basis and as a whole. These contributions will help policymakers consider the energy and land usage and allocation consequences of other policies that they may wish to pursue, which is key for avoiding or at least mitigating unintended consequences of otherwise well-motivated policy choices. 

Authors

Gilles Duranton

University of Pennsylvania (Wharton)