Sunday, 4 September 2011


We all know factor analysis as a tool to analyze interrelationships among a large number of variables and to explain these variables in terms of their common underlying factors. It is a useful tool for market research and can be a useful tool for companies to gauge the mindset of customers. But did we all know that it has wider applications which could range from doing personality tests to solving economic problems of a country!! Yes, leaders of nations across the world can use this tool to assist them in solving the problems of their countries by grouping factors. Suppose a country wants to know about the economic development and growth prospects of its states. The data about the states to be gauged; which are most relevant to economic growth and development are collected and also for those states which already rank high in economic growth and development. One group can be formed of top seven or ten states which rank relatively high in terms of per capita income, industrialization, technologically advanced agriculture etc. These states can form a STANDARD AREA by which the level of development of other states can be compared. While there can be a dispute about the regional homogeneity of the group to be compared with the STANDARD AREA, there can be no dispute over their lesser degree of productive attainment when compared with the STANDARD AREA. So despite the dispute over inclusion of states in the group to be compared, those included will form a region sufficiently homogenous for purpose of analysis. Our interest should be to check whether or not the differences suitable for study of regional growth could be demonstrated in the patterns of relationship between the same variables in the region chosen to be compared.

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Priyanka (13028)
Operations Grp 1

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