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Structural transformation in China and India: A note on macroeconomic policies

  • Rada, Codrina
  • von Arnim, Rudiger

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.

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Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

Volume (Year): 23 (2012)
Issue (Month): 3 ()
Pages: 264-275

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Handle: RePEc:eee:streco:v:23:y:2012:i:3:p:264-275
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/525148

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  1. Rudiger von Arnim & Steve Bannister & Nathan Perry, 2013. "A global model of recovery and rebalancing," Cambridge Journal of Economics, Oxford University Press, vol. 37(4), pages 889-920.
  2. Dani Rodrik & Arvind Subramanian, 2004. "From "Hindu Growth" to Productivity Surge: The Mystery of the Indian Growth Transition," NBER Working Papers 10376, National Bureau of Economic Research, Inc.
  3. Vaciago, Giacomo, 1975. "Increasing Returns and Growth in Advanced Economies: A Re-evaluation," Oxford Economic Papers, Oxford University Press, vol. 27(2), pages 232-39, July.
  4. Alejandro Ramirez & Gustav Ranis & Frances Stewart, . "Economic Growth and Human Development -," QEH Working Papers qehwps18, Queen Elizabeth House, University of Oxford.
  5. Angus Deaton and Jean Drèze & Jean Drèze, 2002. "Poverty and Inequality in India: A Reexamination," Working papers 107, Centre for Development Economics, Delhi School of Economics.
  6. Amartya K. Sen, 1966. "Peasants and Dualism with or without Surplus Labor," Journal of Political Economy, University of Chicago Press, vol. 74, pages 425.
  7. Codrina Rada, 2007. "Stagnation or transformation of a dual economy through endogenous productivity growth," Cambridge Journal of Economics, Oxford University Press, vol. 31(5), pages 711-740, September.
  8. A. P. Thirlwall, 1983. "A Plain Man's Guide to Kaldor's Growth Laws," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 5(3), pages 345-358, April.
  9. Kalpana Kochhar & Utsav Kumar & Raghuram Rajan & Arvind Subramanian, 2006. "India's Patterns of Development: What Happened, What Follows," NBER Working Papers 12023, National Bureau of Economic Research, Inc.
  10. Ute Pieper, 2003. "Sectoral regularities of productivity growth in developing countries--a Kaldorian interpretation," Cambridge Journal of Economics, Oxford University Press, vol. 27(6), pages 831-850, November.
  11. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Oxford University Press, vol. 14(4), pages 375-93, December.
  12. Taylor, Lance, 1985. "A Stagnationist Model of Economic Growth," Cambridge Journal of Economics, Oxford University Press, vol. 9(4), pages 383-403, December.
  13. Rada, Codrina & Taylor, Lance, 2006. "Empty sources of growth accounting, and empirical replacements a la Kaldor and Goodwin with some beef," Structural Change and Economic Dynamics, Elsevier, vol. 17(4), pages 486-500, December.
  14. Montalvo, Jose G. & Ravallion, Martin, 2010. "The pattern of growth and poverty reduction in China," Journal of Comparative Economics, Elsevier, vol. 38(1), pages 2-16, March.
  15. Codrina Rada, 2010. "Formal And Informal Sectors In China And India," Economic Systems Research, Taylor & Francis Journals, vol. 22(2), pages 129-153.
  16. Dutt, Amitava Krishna, 1984. "Stagnation, Income Distribution and Monopoly Power," Cambridge Journal of Economics, Oxford University Press, vol. 8(1), pages 25-40, March.
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