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Geographic Neighbourhood and Cluster Formation: Evidence from Indian Agriculture

Abstract We study an empirical occurrence largely overlooked in studies on income clusters: (i) most clusters include geographic neighbours and non-neighbours; and (ii) not all geographic neighbours are cluster-co-members. Using agricultural income across Indian states, we find a similar pattern in income-clusters over the last 45 years. Logistic regressions that consider state-pairs as the unit of analysis show that cluster membership is not driven by geographic variables but rather by non-geographic factors like weather shock, resource constraints, technology/input usage, extent of crop diversification, infrastructure, policy and institutions