Does Geography Determine Industrialization? Evidence from India
Bishnupriya Gupta (University of Warwick), Paola Giuliano (UCLA) and Nico Voigtlaender (UCLA)
Paper Abstract:
In a seminal paper Franklin Mendels set out the economic reasons for early industrialization in an
agrarian economy. Mendels argued that the seasonal nature of agricultural employment created a
slack in employment, which was picked up by industrial activity. He called this "proto
industrialization". In this first phase of industrialization agriculture and industry co existed within the
rural economy, often within the same household. Describing the development experience of Europe
before the industrial revolution, Mendels argued that in a temperate climate, the short period of
harvest created a high demand for labour and rural industry could employ these workers during the
rest of the year. With increased commercialization and trade, there was regional specialization.
Eric Jones saw subsistence agriculture as individual units to coexist with proto industry as a means of
supplementing income, whereas commercialized agriculture was a collective enterprise and
discouraged individual industrial activity. The regions which became industrial were more likely to
make a transition to modern industry as they faced increased competition from products of modern
industry. This was the case in most of Europe as they faced competition from the goods of the
British industrial revolution. Therefore specialization deepened and modern industry located in
places where there was proto industry. The specialization between areas of commercial agriculture
and proto industry depended on geography. Fertile areas suitable for large scale commercial
agriculture selected into producing food for the market. Less hospitable terrain with small individual
plots saw specialization in industrial activity.
This link between proto industry and modern industrialization has been studied in the context of
many countries. The development of home based industrial production in Asia is seen more as a part
of commercialization rather than a division of labour. India's textile sector in 17th and 18th centuries
developed readily in repose to increased demand from markets in Europe and East Asia. Textile
weaving and agricultural production often went hand in hand. A different example comes from
Japan, where the fishery industry developed in the Tokugawa period as demand for fish meal based
fertilizer increased. This is an example of a linkage effect from agriculture to industry.
In this paper, we develop a new framework to study the process of early industrialization. We focus
of the interconnection between agriculture and industry, using the linkages that arise between the
two sectors. Agriculture has a need for industrial inputs. Some agriculture products need more
processing than others. These backward and forward linkages create the need to develop industrial
activity. Agricultural output in a region depends of geographical factors, such a soil, rainfall and
temperature. India provides an interesting example to study connection between agriculture and
industry. Given the geographic diversity of the country , agricultural production varies across regions
and allows us to explore the connection between geography and industrialization.
We use crop suitability data to understand the geographic variation in agricultural production. We
analyze the Indian occupational census from 1931 to link district level agricultural output to
employment in industrial occupations and find that linkages from agriculture can explain the
regional diversity of early industrialization in India.