IDEAS home Printed from https://ideas.repec.org/p/ewp/wpaper/451web.html
   My bibliography  Save this paper

Structural transformation in India: The Role of the Service Sector

Author

Listed:
  • Rafael Serrano-Quintero

    (Universitat de Barcelona, BEAT and CREB)

Abstract

Contrary to the experience of industrialized countries, productivity growth of Indian services has been consistently faster than manufacturing. In this paper, I document that (i) the fastest growing industries in services grow faster than in manufacturing; (ii) faster productivity growth in services than in manufacturing is not because of sluggish manufacturing productivity; (iii) the supply of skilled workers in India is skewed towards tertiary education and (iv) the service sector is the most skill intensive; (v) returns to schooling are larger for the high-productivity services. To quantify and rationalize these facts, I construct a multi-sector model of estructural change with high and low-skilled workers. The calibrated model suggests that the large supply of high-skill workers combined with higher skill intensity in the service sector seem to be behind the services take-off. The data imply that service sub-sectors are gross substitutes while manufacturing sub-sectors are gross complements. This will accelerate productivity growth in services and decelerate productivity growth in manufacturing.

Suggested Citation

  • Rafael Serrano-Quintero, 2023. "Structural transformation in India: The Role of the Service Sector," UB School of Economics Working Papers 2023/451, University of Barcelona School of Economics.
    • Handle: RePEc:ewp:wpaper:451web
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/2445/202190
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Restuccia, Diego & Yang, Dennis Tao & Zhu, Xiaodong, 2008. "Agriculture and aggregate productivity: A quantitative cross-country analysis," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 234-250, March.
    2. Roy, Tirthankar, 2011. "Economic History of India, 1857-1947," OUP Catalogue, Oxford University Press, edition 3, number 9780198074175.
    3. Matsuyama, Kiminori, 1992. "Agricultural productivity, comparative advantage, and economic growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 317-334, December.
    4. Dani Rodrik & Arvind Subramanian, 2005. "From "Hindu Growth" to Productivity Surge: The Mystery of the Indian Growth Transition," IMF Staff Papers, Palgrave Macmillan, vol. 52(2), pages 193-228, September.
    5. Robert Jensen, 2012. "Do Labor Market Opportunities Affect Young Women's Work and Family Decisions? Experimental Evidence from India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(2), pages 753-792.
    6. Nicolas Ziebarth, 2013. "Are China and India Backwards? Evidence from the 19th Century U.S. Census of Manufactures," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 86-99, January.
    7. Paula Bustos & Juan Manuel Castro Vincenzi & Joan Monras & Jacopo Ponticelli, 2019. "Structural Transformation, Industrial Specialization, and Endogenous Growth," Working Papers wp2019_1906, CEMFI.
    8. repec:hoo:wpaper:e-92-3 is not listed on IDEAS
    9. Bold, Tessa & Barton, Nicholas & Sandefur, Justin, 2017. "Measuring Rents from Public Employment: Regression discontinuity evidence from Kenya," CEPR Discussion Papers 12105, C.E.P.R. Discussion Papers.
    10. Tianyu Fan & Michael Peters & Fabrizio Zilibotti, 2021. "Growing Like India: The Unequal Effects of Service-Led Growth," NBER Working Papers 28551, National Bureau of Economic Research, Inc.
    11. Nicholas Barton & Tessa Bold & Justin Sandefur, 2017. "Measuring Rents from Public Employment: Regression Discontinuity Evidence from Kenya - Working Paper 457," Working Papers 457, Center for Global Development.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chudgar, Amita & Sakamoto, Jutaro, 2021. "Similar work, different pay? Private school teacher working conditions in India," International Journal of Educational Development, Elsevier, vol. 86(C).
    2. Dietrich Vollrath, 2009. "The dual economy in long-run development," Journal of Economic Growth, Springer, vol. 14(4), pages 287-312, December.
    3. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941, Elsevier.
    4. Paula Bustos & Juan Manuel Castro Vincenzi & Joan Monras & Jacopo Ponticelli, 2019. "Structural Transformation, Industrial Specialization, and Endogenous Growth," Working Papers wp2019_1906, CEMFI.
    5. Keigo Nishida, 2014. "Agricultural productivity differences and credit market imperfections," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 23(8), pages 1262-1276, December.
    6. Alvarez-Cuadrado, Francisco & Long, Ngo & Poschke, Markus, 2017. "Capital-labor substitution, structural change and growth," Theoretical Economics, Econometric Society, vol. 12(3), September.
    7. Been-Lon Chen & Shian-Yu Liao, 2015. "The Role of Agricultural Productivity on Structural Change," Review of Development Economics, Wiley Blackwell, vol. 19(4), pages 971-987, November.
    8. Tasso Adamopoulos & Fernando Leibovici, 2024. "Trade Risk and Food Security," Working Papers 2024-004, Federal Reserve Bank of St. Louis, revised Feb 2024.
    9. Gangopadhyay, Kausik & Mondal, Debasis, 2021. "Productivity, relative sectoral prices, and total factor productivity: Theory and evidence," Economic Modelling, Elsevier, vol. 100(C).
    10. Martin Fiszbein, 2017. "Agricultural Diversity, Structural Change and Long-run Development: Evidence from the U.S," NBER Working Papers 23183, National Bureau of Economic Research, Inc.
    11. Ponticelli, Jacopo & Bustos, Paula & Castro-Vincenzi, Juan & Monras, Joan, 2018. "Industrialization without Innovation," CEPR Discussion Papers 13379, C.E.P.R. Discussion Papers.
    12. Seung Mo Choi & Hwagyun Kim & Xiaohan Ma, 2021. "Trade policies and growth in emerging economies: policy experiments," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(3), pages 603-629, August.
    13. Danny McGowan & Chrysovalantis Vasilakis, 2015. "Reap What You Sow: Agricultural Productivity, Structural Change and Urbanization," LIDAM Discussion Papers IRES 2015019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    14. Esther Duflo & Pascaline Dupas & Michael Kremer, 2021. "The Impact of Free Secondary Education: Experimental Evidence from Ghana," NBER Working Papers 28937, National Bureau of Economic Research, Inc.
    15. Seung Mo Choi & Hwagyun Kim & Xiaohan Ma, 2021. "Trade, structural transformation and growth," The World Economy, Wiley Blackwell, vol. 44(6), pages 1770-1794, June.
    16. Pritchett, Lant, 2024. "Investing in Human Capital in Africa: A framework for research," International Journal of Educational Development, Elsevier, vol. 107(C).
    17. Lee, Iona Hyojung, 2018. "Industrial output fluctuations in developing countries: General equilibrium consequences of agricultural productivity shocks," European Economic Review, Elsevier, vol. 102(C), pages 240-279.
    18. Diego Restuccia & Richard Rogerson, 2017. "The Causes and Costs of Misallocation," Journal of Economic Perspectives, American Economic Association, vol. 31(3), pages 151-174, Summer.
    19. Unjung Whang, 2017. "Structural Transformation and Comparative Advantage: Implications for Small Open Economies," The World Economy, Wiley Blackwell, vol. 40(4), pages 743-763, April.
    20. Pritchett, Lant, 2024. "Investing in human capital in Africa: a framework for research," LSE Research Online Documents on Economics 123655, London School of Economics and Political Science, LSE Library.

    More about this item

    Keywords

    Structural transformation; Productivity; Human Capital; India.;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ewp:wpaper:451web. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: University of Barcelona School of Economics (email available below). General contact details of provider: https://edirc.repec.org/data/feubaes.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.