Based on ongoing research by Rana Hasan, Abhijit Sengupta, and Sneha Lamba. 4/14/12
Outline
I. Background and motivation (including some stylized facts about the growth process and poverty from recent literature) II. What will promote greater inclusion? Answers through the lens of poverty reduction and structural change III. Policy messages
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While much debate exists between when exactly Indias growth rates took off, it seems to be some time in the early/mid-1980s
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Services have contributed almost 2/3rds of growth The share of agriculture has declined as would be expected But the share of manufacturing has been roughly constant
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Policy drivers
Trade and industrial policy liberalization from early 1980s and especially 1990s
150
1985
1990
1995 year
2000
2005
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Source: Gupta et al (2009)
Rural- SC/ST Urban- SC/ST Rural- Other Urban- Other headed hh headed hh headed hh headed hh 1983 1994 2005
Note: MPCE=Monthly per capita expenditures (urban Delhi 2005 Rupees) 4/14/12 et al (2010) 77 Source: Cain
Given this basic feature of the data, it should be no surprise to find that consumption (or expenditure) poverty in India has declined over time This result holds regardless of the poverty line i.e., whether it is the Government of Indias official poverty line or the international $1.25 per day poverty line
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99
The real debate: How can the pace of poverty reduction be accelerated?
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Are states that diversify their structure of production (e.g., away from agriculture/traditional sectors) the ones with greater success in reducing poverty? How much does diversification in the structure of employment matter? Does the policy and institutional context matter in the answers to the above questions?
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ASA
BIH
GUJ
HAR
KAR
20 40 60 80
KER
MAH
MP
ORI
PUN
20 40 60 80
RAJ
TN
UP
WB
0 1980
1990
1990
1990
2000 2010
Poverty Rate 2
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ASA
BIH
GUJ
HAR
KAR
KER
MAH
Index of Concentration
.1
.15
.2
.25
10
12
MP
.3
ORI
PUN
RAJ
TN
UP
WB
.1 10
.15
.2
.25
12
10
12
10
12
10
12
10
12
10
12
10
12
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Note: The Extent of concentration is measured by the Herfindahl Index. A higher value implies greater concentration.
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ASA
BIH
GUJ
HAR
KAR
KER
MAH
Index of Concentration
.2
.3
.4
.5
10
12
MP
.6
ORI
PUN
RAJ
TN
UP
WB
.2 10
.3
.4
.5
12
10
12
10
12
10
12
10
12
10
12
10
12
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Note: The Extent of concentration is measured by the Herfindahl Index. A higher value implies greater concentration.
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As Rodrik and McMillan (2011) note, there are two ways in which aggregate labour productivity can grow
Capital accumulation, technological improvement etc. can improve productivity within a sector Labour can move across sectors i.e. from low productivity to high productivity sectors. (Structural change)
If the latter effect is non-existent or weak, then the benefits of productivity growth may, in effect, bypass workers
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Indonesia
India
12 10 8 6 4 2 0
Brazil
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Structural Change
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States with faster aggregate labour productivity growth also experienced faster reduction in poverty Productivity growth due to both within sector and structural change in employment have contributed to poverty reduction The contribution of structural change in employment seems greater (though less precisely estimated).
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Obstacles to structural transformation in output and employment will impede reductions in poverty Removing these involves addressing
Infrastructure bottlenecks (power, roads, etc.) Issues with land acquisition Education and skills Getting the design of labor regulations and social protection right
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Thank you
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