IDEAS home Printed from https://ideas.repec.org/a/spr/joecin/v21y2023i3d10.1007_s10888-023-09597-3.html
   My bibliography  Save this article

The distributional impact of structural transformation in rural India: case-study evidence and model-based simulation

Author

Listed:
  • Chris Elbers

    (Vrije Universiteit Amsterdam)

  • Peter Lanjouw

    (Vrije Universiteit Amsterdam)

Abstract

The North Indian village of Palanpur has been the subject of close study over a period of six decades from 1957/8 to 2015. Himanshu et al. (2018) document the evolution of the village economy over this period and point to two distinct drivers of growth and distribution of income. An early period of agricultural intensification associated with the green revolution saw an expansion of irrigation and the introduction of new agricultural technologies, leading to rising incomes accompanied by falling poverty and fairly stable, or even declining, income inequality. From about the mid-1970s onwards, a cumulative process of non-farm diversification took hold, and was associated with further growth and poverty decline but also a significant rise in income inequality. Such a process of structural transformation has been observed more widely in rural India. We construct a simple model of a village economy that captures several of the salient features of the Palanpur economy and society, and that is able to reproduce the distributional outcomes observed in the village. Our analysis suggests that while non-farm diversification occurred alongside rising inequality, the counterfactual of no diversification would in fact be associated with an even greater increase. We suggest therefore that non-farm diversification has in fact helped to contain growth in inequality, and has played a particularly pronounced role in reducing poverty. To the extent that other villages in India share features similar to Palanpur, our findings may also hold elsewhere.

Suggested Citation

  • Chris Elbers & Peter Lanjouw, 2023. "The distributional impact of structural transformation in rural India: case-study evidence and model-based simulation," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 21(3), pages 703-722, September.
    • Handle: RePEc:spr:joecin:v:21:y:2023:i:3:d:10.1007_s10888-023-09597-3
    DOI: 10.1007/s10888-023-09597-3
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10888-023-09597-3
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10888-023-09597-3?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gibson, John & Datt, Gaurav & Murgai, Rinku & Ravallion, Martin, 2017. "For India’s Rural Poor, Growing Towns Matter More Than Growing Cities," World Development, Elsevier, vol. 98(C), pages 413-429.
    2. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 963-1002.
    3. Gaurav Datt & Martin Ravallion, 1998. "Farm productivity and rural poverty in India," Journal of Development Studies, Taylor & Francis Journals, vol. 34(4), pages 62-85.
    4. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
    5. Araujo, M. Caridad & Ferreira, Francisco H.G. & Lanjouw, Peter & Özler, Berk, 2008. "Local inequality and project choice: Theory and evidence from Ecuador," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1022-1046, June.
    6. Lanjouw, Peter & Stern, Nicholas, 1998. "Economic Development in Palanpur over Five Decades," OUP Catalogue, Oxford University Press, number 9780198288329, Decembrie.
    7. Bliss, C. J. & Stern, N. H., 1982. "Palanpur: The Economy of an Indian Village," OUP Catalogue, Oxford University Press, number 9780198284192, Decembrie.
    8. Erin C. Lentz, 2017. "Keeping Up with the Neighbors? Reference Groups in Ghana," Economic Development and Cultural Change, University of Chicago Press, vol. 66(1), pages 91-112.
    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. Chris Elbers & Peter Lanjouw, 2019. "The distributional impact of structural transformation in rural India: Model-based simulation and case-study evidence," WIDER Working Paper Series wp-2019-33, World Institute for Development Economic Research (UNU-WIDER).
    2. Jayaraman, Rajshri & Lanjouw, Peter, 1999. "The Evolution of Poverty and Inequality in Indian Villages," The World Bank Research Observer, World Bank, vol. 14(1), pages 1-30, February.
    3. Atsebi, Jean-Marc Bédhat & Ferrer-i-Carbonell, Ada, 2022. "Relative deprivation in Tanzania: Relative concerns and empathy," Journal of Economic Behavior & Organization, Elsevier, vol. 198(C), pages 389-408.
    4. Lanjouw, Jean Olson, 1999. "Information and the operation of markets: tests based on a general equilibrium model of land leasing in India," Journal of Development Economics, Elsevier, vol. 60(2), pages 497-527, December.
    5. Indranil Dutta & Shruti Kapoor & Prasanta K. Pattanaik, 2020. "Nutrient consumption in India: Evidence from a village study," Review of Development Economics, Wiley Blackwell, vol. 24(3), pages 855-877, August.
    6. Peter Lanjouw, 2007. "Rural Non-Farm Employment in India: Access, Income, farm, Poverty Impact," Working Papers id:913, eSocialSciences.
    7. Karlsson, Martin & Nilsson, Therese & Lyttkens, Carl Hampus & Leeson, George, 2010. "Income inequality and health: Importance of a cross-country perspective," Social Science & Medicine, Elsevier, vol. 70(6), pages 875-885, March.
    8. Brockington, Dan & Coast, Ernestina & Mdee, A & Howland, O & Randall, Sara, 2019. "Assets and domestic units: methodological challenges for longitudinal studies of poverty dynamics," LSE Research Online Documents on Economics 100877, London School of Economics and Political Science, LSE Library.
    9. Andrew E. Clark & Claudia Senik & Katsunori Yamada, 2022. "The Joneses in Japan: income comparisons and financial satisfaction," The Japanese Economic Review, Springer, vol. 73(2), pages 351-372, April.
    10. Mary A. Burke, 2015. "The distributional effects of contractual norms: the case of cropshare agreements," Working Papers 15-7, Federal Reserve Bank of Boston.
    11. Lanjouw, Peter & Rao, Vijayendra, 2011. "Revisiting Between-Group Inequality Measurement: An Application to the Dynamics of Caste Inequality in Two Indian Villages," World Development, Elsevier, vol. 39(2), pages 174-187, February.
    12. Mulubrhan Amare & Bekele Shiferaw & Hiroyuki Takeshima & George Mavrotas, 2021. "Variability in agricultural productivity and rural household consumption inequality: Evidence from Nigeria and Uganda," Agricultural Economics, International Association of Agricultural Economists, vol. 52(1), pages 19-36, January.
    13. Heyer, Judith, 2020. "How Lives Change," Review of Agrarian Studies, Foundation for Agrarian Studies, vol. 10(01), July.
    14. Rambonilaza, Mbolatiana, 2004. "Normes sociales et productivité dans le processus d’appariement des contrats agricoles," L'Actualité Economique, Société Canadienne de Science Economique, vol. 80(4), pages 571-592, Décembre.
    15. Lanjouw, P. & Marra, M.R., 2018. "Urban poverty across the spectrum of Vietnam’s towns and cities," World Development, Elsevier, vol. 110(C), pages 295-306.
    16. Martin Ravallion, 2013. "The Idea of Antipoverty Policy," NBER Working Papers 19210, National Bureau of Economic Research, Inc.
    17. Peter Lanjouw & Hai-Anh Dang, 2018. "Inequality trends and dynamics in India: The bird’s-eye and the granular perspectives," WIDER Working Paper Series 189, World Institute for Development Economic Research (UNU-WIDER).
    18. Platteau, Jean-Philippe & Bonjean, Isabelle & Verardi, Vincenzo, 2017. "Innovation Adoption and Liquidity Constraints in the Presence of Grassroots Extension Agents: Evidence from the Peruvian Highla," CEPR Discussion Papers 12263, C.E.P.R. Discussion Papers.
    19. Peter Lanjouw & Rinku Murgai & Nicholas Stern, 2013. "Nonfarm diversification, poverty, economic mobility, and income inequality: a case study in village India," Agricultural Economics, International Association of Agricultural Economists, vol. 44(4-5), pages 461-473, July.
    20. Hai‐Anh H. Dang & Peter Lanjouw, 2018. "Inequality trends and dynamics in India: The bird's-eye and the granular perspectives," WIDER Working Paper Series wp-2018-189, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    Keywords

    Income inequality; Rural diversification; Non-farm employment; Village study; Poverty; Simulation model;
    All these keywords.

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

    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:spr:joecin:v:21:y:2023:i:3:d:10.1007_s10888-023-09597-3. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.