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

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  • Rada, Codrina
  • von Arnim, Rudiger

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

  • Rada, Codrina & von Arnim, Rudiger, 2012. "Structural transformation in China and India: A note on macroeconomic policies," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 264-275.
  • Handle: RePEc:eee:streco:v:23:y:2012:i:3:p:264-275
    DOI: 10.1016/j.strueco.2012.03.006
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    5. 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.
    6. Codrina Rada, 2010. "Formal And Informal Sectors In China And India," Economic Systems Research, Taylor & Francis Journals, vol. 22(2), pages 129-153.
    7. Vaciago, Giacomo, 1975. "Increasing Returns and Growth in Advanced Economies: A Re-evaluation," Oxford Economic Papers, Oxford University Press, vol. 27(2), pages 232-239, July.
    8. Kochhar, Kalpana & Kumar, Utsav & Rajan, Raghuram & Subramanian, Arvind & Tokatlidis, Ioannis, 2006. "India's pattern of development: What happened, what follows?," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 981-1019, July.
    9. 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.
    10. 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.
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    15. Angus Deaton & Jean Dreze, 2002. "Poverty and Inequality in India: A Re-Examination," Working Papers 184, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
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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.
    3. Raúl Vázquez López, 2016. "Do Technology-Intensive Activities Drive Industrial Labor Productivity Levels?," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 123-150, November.
    4. Von Arnim, Rudi & Tröster, Bernhard & Staritz, Cornelia & Raza, Werner, 2015. "Commodity dependence and price volatility in least developed countries: A structuralist computable general equilibrium model with applications to Burkina Faso, Ethiopia and Mozambique," Working Papers 52, Österreichische Forschungsstiftung für Internationale Entwicklung (ÖFSE) / Austrian Foundation for Development Research.
    5. repec:wsi:serxxx:v:62:y:2017:i:04:n:s021759081740032x is not listed on IDEAS

    More about this item

    Keywords

    Structural change; Endogenous productivity; Dual economy; China; India;

    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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