Structural Change and Poverty Reduction at Sub-State Levels in India

Sen Gupta, Abhijit and More, Vishal and Gupta, Kanupriya (2016): Structural Change and Poverty Reduction at Sub-State Levels in India.

Abstract

Over the last two decades India has witnessed a significant rise in growth rate compared to historical levels. In this study, we investigate the pattern and nature of growth, and its implication for poverty reduction in India. In particular, we focus on the extent to which, structural change defined as changes in the composition of the economy in terms of key sectors, their employment and productivity, has an impact on poverty reduction. The paper is first of its kind in focusing on these issue at the sub-state level, which is important given the large size of Indian states that mask a great deal of heterogeneity. Moreover, the paper focuses on alternate definitions of structural change, including for the first differentiating between productivity increases in India arising from workers moving into above average productivity level sectors from workers moving to sectors that are experiencing positive productivity growth. The paper finds that while improving sectoral productivity is important for poverty reduction, there is a strong link between shift of workers into sectors witnessing an increase in poverty and poverty reduction. Thus poverty reduction requires generating jobs in dynamic sectors that are witnessing productivity growth as well as imparting adequate skills to the workforce to make them employable in these sectors.

• Item Type: MPRA Paper
• Language: English
• Keywords: Structural change, poverty reduction, reallocation effect and labour productivity
• Subjects: I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I32 - Measurement and Analysis of Poverty; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J62 - Job, Occupational, and Intergenerational Mobility; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

References

Besley, T., and R. Burgess (2000) “Land Reform, Poverty Reduction and Growth: Evidence from India”, The Quarterly Journal of Economics, Vol. 117 (4), pages 389- 430.

Botero, J., S. Djankov, R. La Porta, F. Lopez-Di Silanes, and A. Shleifer (2004) “The Regulation of Labor”, The Quarterly Journal of Economics, Vol. 119 (4), pages 1339–1382.

Betts, C., R. Giri, and R. Verma (2013) “Trade, Reform, and Structural Transformation in South Korea”, CAFE Research Paper no.13.03.

Chenery, H. B. (1960) “Patterns of Industrial Growth”, American Economic Review. Vol. 50 (4), pages 624–654.

Dekle, R., and G. Vandenbroucke (2012) “A quantitative analysis of China's structural transformation”, Journal of Economic Dynamics and Control, Vol. 36(1), pages 119-135.

De Vries, G., T. Marcel and K. de Vries, (2015) "Structural Transformation in Africa: Static Gains, Dynamic Losses," Journal of Development Studies, Vol. 51(6), pages 674-688.

Dietrich, A. (2012) "Does Growth Cause Structural Change, or is it the Other Way Around? A Dynamic Panel Data Analysis for Seven OECD Countries," Empirical Economics, Vol. 43(3), pages 915-944.

Fallon, P. R., and R. E. B. Lucas (1993) “Job Security Regulations and the Dynamic Demand for Industrial Labor in India and Zimbabwe”, Journal of Development Economics, Vol. 40 (2), pages 241–75.

Felipe, J., C. Dacuycuy, and M. Lanzafame (2014) “The Declining Share of Agricultural Employment in the People’s Republic of China”, ADB Economics Working Paper Series No. 419.

Felipe, J., A. Mehta, and C. Rhee (2015) “Manufacturing Matters...but It’s the Jobs that Count”, ADB Economics Working Paper Series No. 420.

Hasan, R., S. Lamba, and A. Sen Gupta (2015) “Growth, Structural Change and Poverty Reduction”, in K.V. Ramaswamy eds., Labour, Employment and Economic Growth in India, Cambridge University Press, pages 91-126

Kochhar, K., U. Kumar, R. Rajan, A. Subramanian, and I. Tokatlidis (2006) “India's pattern of development: What happened, what follows?” Journal of Monetary Economics, Vol. 53(5), pages 981-1019.

Kuznets, S. (1971) “Economic Growth of Nations: Total Output and Production Structure”, Belknap Press of Harvard University Press.

Lin, J. Y., and C. Monga (2010) “Growth Identification and Facilitation: The Role of the State in the Dynamics of Structural Change”, World Bank Policy Working Paper No. 5313.

McMillan, M. and D. Rodrik (2011) “Globalization, Structural Change, and Economic Growth”, in Marc Bachetta and Marion Jansen, eds., Making Globalization Socially Sustainable, International Labor Organization and World Trade Organization, Geneva, pages 49-84

McGregor, N. and B. Verspagen (2016) “The Role of Structural Transformation in the Potential of Asian Economic Growth”, ADB Economics Working Paper Series No. 479.

McMillan, M., D. Rodrik, and I. Verduzci-Gallo (2014) “Globalization, Structural Change, and Productivity Growth, with an Update on Africa”, World Development, Vol. 63 (1), pages 11–32.

Sen, K., and R. Vaidya (1997) “The Process of Financial Liberalization in India”, Oxford University Press, Delhi.

Sen, K. (2009) “Trade Policy, Inequality and Performance in Indian Manufacturing”, London: Routledge.

Sen, K. (2014) “The Indian Economy in the Post-Reform Period: Growth without Structural Transformation?”, In D. Davin and B. Harriss-White, eds. China and India: Pathways of Economic and Social Development, Oxford University Press.

Sen, K. (2016) “The Determinants of Structural Transformation in Asia: A Review of the Literature”, ADB Economics Working Paper Series no. 478.

Stiglitz, J., and A. Weiss (1981) “Credit Rationing in Markets with Imperfect Information” American Economic Review, Vol. 71 (3), pages 393–410.

Studwell, J. (2013) “How Asia Works: Success and Failure in the World’s Most Dynamic Region”, London: Profile Books.

Ungör, M. (2015) “Productivity Growth and Labor Reallocation: Latin America Versus East Asia”, Manuscript, Central Bank of Turkey, Istanbul.

Teignier, M. (2013) “The Role of Trade in Structural Transformation”, University of Barcelona Working Paper No. E13/300.

Verma, R. (2012) “Can Total Factor Productivity Explain Value Added Growth in Services?”, Journal of Development Economics, 99(1), pages 163-177.

World Bank (2013) “World Development Report: Jobs”. Washington, DC.