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Structural Transformation in China and India: The Role of Macroeconomic Policies

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  • Codrina Rada
  • Rudiger von Arnim

Abstract

This paper explores macroeconomic policies that can sustain structural change in China and India. A two--sector open--economy model with endogenous productivity growth, demand driven output and income distribution as an important determinant of economic activity is calibrated to a 2000 SAM for China and a 1999/2000 SAM for India. Short-- run analysis concerns temporary equilibria for output, productivity and employment growth rates in the formal sector. In the long--run, the model allows for multiple equilibria which can describe cases of (a) underdevelopment and structural heterogeneity or (b) sustained growth and development. Several simulation exercises are conducted. Specifically, we consider how changes in investment, wages, labor productivity trend and a depreciation of currency affect the macroeconomy and job creation in the formal sector.

Suggested Citation

  • Codrina Rada & Rudiger von Arnim, 2011. "Structural Transformation in China and India: The Role of Macroeconomic Policies," Working Paper Series, Department of Economics, University of Utah 2011_05, University of Utah, Department of Economics.
    • Handle: RePEc:uta:papers:2011_05
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    File URL: http://economics.utah.edu/research/publications/2011_05.pdf
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    References listed on IDEAS

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    1. Rudiger von Arnim & Steve Bannister & Nathan Perry, 2013. "A global model of recovery and rebalancing," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 37(4), pages 889-920.
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    Cited by:

    1. Rada, Codrina & von Arnim, Rudiger, 2014. "India's structural transformation and role in the world economy," Journal of Policy Modeling, Elsevier, vol. 36(1), pages 1-23.
    2. Godin, Antoine, 2014. "Job Guarantee: a Structuralist Perspective," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 16.

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    More about this item

    Keywords

    Structural change; endogenous productivity; dual economy; China; India JEL Classification: O11; O41; E26;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy

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