Invariant features of spatial inequality in consumption: the case of India

TL;DR

This paper uncovers that consumption expenditure distributions across different Indian states and social groups exhibit invariant features once normalized, and links state-wise inequality with economic growth.

Contribution

It demonstrates the robustness of consumption distribution invariance across diverse sociological factors and proposes a model explaining the positive correlation between inequality and growth.

Findings

Consumption distributions are nearly identical after normalization across states and groups.

State inequality correlates positively with economic growth, consistent with Kuznets' curve.

A model suggests better technology can increase inequality alongside growth.

Abstract

We study the distributional features and inequality of consumption expenditure across India, for different states, castes, religion and urban-rural divide. We find that even though the aggregate measures of inequality are fairly diversified across states, the consumption distributions show near identical statistics, once properly normalized. This feature is seen to be robust with respect to variations in sociological and economic factors. We also show that state-wise inequality seems to be positively correlated with growth which is in accord with the traditional idea of Kuznets' curve. We present a brief model to account for the invariance found empirically and show that better but riskier technology draws can create a positive correlation between inequality and growth.