IDEAS home Printed from https://ideas.repec.org/a/spr/jqecon/v23y2025i3d10.1007_s40953-025-00452-y.html
   My bibliography  Save this article

Analyzing the Impact of Structural Change on Aggregate Productivity in Indian States: A Three Sector Study

Author

Listed:
  • T Thasni

    (Indian Institute of Management Kashipur)

  • Kausik Gangopadhyay

    (Indian Institute of Management Kozhikode)

  • Debasis Mondal

    (Indian Institute of Technology Delhi)

Abstract

In this paper, we present the substantial disparities in sectoral labour productivity across Indian states from 1983 to 2017. We decompose the change in aggregate labour productivity into two components - ‘within sector’ and ‘reallocation’ - utilizing a three sector disaggregation. Reallocation, or structural transformation, contributes modestly to productivity changes for all states except Punjab. Productivity growth in agriculture and manufacturing sectors is nearly identical, while growth in services consistently outpaces both. Regarding the contribution of different sectors to aggregate productivity growth, agriculture remains the primary contributor in four states, whereas growth within the tertiary sector dominates in other 10 states. Gujarat stands out as the only state where manufacturing contributes the most to its aggregate productivity growth, underscoring the stagnancy of manufacturing in the growth dynamics of the remaining states. The variance in productivity across states is most pronounced in agriculture, with no indication of these sectoral productivity variances diminishing over time. States that exhibited the highest level of agricultural productivity in 1983 (Punjab, Gujarat, Kerala, Haryana) witnessed the greatest decline in its agricultural labour share over the subsequent 35 years. However, the structural change component in their productivity change is not notably high. This signifies the prominent role of ‘within sector’ productivity change, accounting for approximately 81% of overall productivity growth of states.

Suggested Citation

  • T Thasni & Kausik Gangopadhyay & Debasis Mondal, 2025. "Analyzing the Impact of Structural Change on Aggregate Productivity in Indian States: A Three Sector Study," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 23(3), pages 899-923, September.
    • Handle: RePEc:spr:jqecon:v:23:y:2025:i:3:d:10.1007_s40953-025-00452-y
    DOI: 10.1007/s40953-025-00452-y
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40953-025-00452-y
    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/s40953-025-00452-y?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

    for a different version of it.

    References listed on IDEAS

    as
    1. Margarida Duarte & Diego Restuccia, 2010. "The Role of the Structural Transformation in Aggregate Productivity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(1), pages 129-173.
    2. de Vries, Gaaitzen J. & Erumban, Abdul A. & Timmer, Marcel P. & Voskoboynikov, Ilya & Wu, Harry X., 2012. "Deconstructing the BRICs: Structural transformation and aggregate productivity growth," Journal of Comparative Economics, Elsevier, vol. 40(2), pages 211-227.
    3. Kevin Fox, 2012. "Problems with (dis)aggregating productivity, and another productivity paradox," Journal of Productivity Analysis, Springer, vol. 37(3), pages 249-259, June.
    4. Gaaitzen de Vries & Marcel Timmer & Klaas de Vries, 2015. "Structural Transformation in Africa: Static Gains, Dynamic Losses," Journal of Development Studies, Taylor & Francis Journals, vol. 51(6), pages 674-688, June.
    5. Dani Rodrik, 2014. "The Past, Present, and Future of Economic Growth," Challenge, Taylor & Francis Journals, vol. 57(3), pages 5-39.
    6. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(4), pages 869-882.
    7. L. Rachel Ngai & Christopher A. Pissarides, 2007. "Structural Change in a Multisector Model of Growth," American Economic Review, American Economic Association, vol. 97(1), pages 429-443, March.
    8. Xinshen Diao & Margaret McMillan & Dani Rodrik, 2019. "The Recent Growth Boom in Developing Economies: A Structural-Change Perspective," Springer Books, in: Machiko Nissanke & José Antonio Ocampo (ed.), The Palgrave Handbook of Development Economics, chapter 9, pages 281-334, Springer.
    9. Daron Acemoglu & Veronica Guerrieri, 2008. "Capital Deepening and Nonbalanced Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 467-498, June.
    10. Barry Bosworth & Susan M. Collins, 2008. "Accounting for Growth: Comparing China and India," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 45-66, Winter.
    11. Verma, Rubina, 2012. "Can total factor productivity explain value added growth in services?," Journal of Development Economics, Elsevier, vol. 99(1), pages 163-177.
    12. Chetan Ghate & Gerhard Glomm & Jialu Liu Streeter, 2016. "Sectoral Infrastructure Investments in an Unbalanced Growing Economy: The Case of Potential Growth in India," Asian Development Review, MIT Press, vol. 33(2), pages 144-166, September.
    13. Kausik Gangopadhyay & Debasis Mondal & Thasni T, 2024. "The Decomposition of Productivity Growth for India: Before and After 1991," IIM Kozhikode Society & Management Review, , vol. 13(1), pages 90-100, January.
    14. Gangopadhyay, Kausik & Mondal, Debasis, 2021. "Productivity, relative sectoral prices, and total factor productivity: Theory and evidence," Economic Modelling, Elsevier, vol. 100(C).
    15. Mokyr, Joel, 1977. "Demand vs. Supply in the Industrial Revolution," The Journal of Economic History, Cambridge University Press, vol. 37(4), pages 981-1008, December.
    16. Douglas Gollin & Joseph P. Kaboski, 2023. "New views of structural transformation: insights from recent literature," Oxford Development Studies, Taylor & Francis Journals, vol. 51(4), pages 339-361, October.
    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. Mondal, Debasis, 2019. "Structural transformation and productivity growth in India during 1960–2010," Economic Modelling, Elsevier, vol. 82(C), pages 401-419.
    2. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941, Elsevier.
    3. Huikang Ying, 2014. "Growth and Structural Change in a Dynamic Lagakos-Waugh Model," Bristol Economics Discussion Papers 14/639, School of Economics, University of Bristol, UK.
    4. Cai, Wenbiao, 2015. "Structural change accounting with labor market distortions," Journal of Economic Dynamics and Control, Elsevier, vol. 57(C), pages 54-64.
    5. Erumban, Abdul Azeez & Das, Deb Kusum & Aggarwal, Suresh & Das, Pilu Chandra, 2019. "Structural change and economic growth in India," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 186-202.
    6. Murat Ungor, 2017. "Productivity Growth and Labor Reallocation: Latin America versus East Asia," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 25-42, March.
    7. Uy, Timothy & Yi, Kei-Mu & Zhang, Jing, 2013. "Structural change in an open economy," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 667-682.
    8. Hehe Liu & Tianyu Yang, 2015. "Explaining the Productivity Growth Gap Between China and India: The Role of Structural Transformation," The Developing Economies, Institute of Developing Economies, vol. 53(2), pages 100-121, June.
    9. Alessandro Nuvolari & Emanuele Russo, 2019. "Technical progress and structural change: a long-term view," LEM Papers Series 2019/17, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    10. Liao, Junmin, 2020. "The rise of the service sector in China," China Economic Review, Elsevier, vol. 59(C).
    11. Alvarez-Cuadrado, Francisco & Long, Ngo & Poschke, Markus, 2017. "Capital-labor substitution, structural change and growth," Theoretical Economics, Econometric Society, vol. 12(3), September.
    12. Gangopadhyay, Kausik & Mondal, Debasis, 2021. "Productivity, relative sectoral prices, and total factor productivity: Theory and evidence," Economic Modelling, Elsevier, vol. 100(C).
    13. Margarida Duarte & Diego Restuccia, 2020. "Relative Prices and Sectoral Productivity," Journal of the European Economic Association, European Economic Association, vol. 18(3), pages 1400-1443.
    14. Lifeng Zhang, 2015. "A Multi-sector Model of Public Expenditure and Growth," Journal of Economics, Springer, vol. 115(1), pages 73-93, May.
    15. Erumban, Abdul A. & de Vries, Gaaitzen J., 2024. "Structural change and poverty reduction in developing economies," World Development, Elsevier, vol. 181(C).
    16. Ju, Jiandong & Lin, Justin Yifu & Wang, Yong, 2015. "Endowment structures, industrial dynamics, and economic growth," Journal of Monetary Economics, Elsevier, vol. 76(C), pages 244-263.
    17. Giulia FELICE, 2009. "Size and composition of public investment, structural change and growth," Departmental Working Papers 2009-28, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano, revised 27 Dec 2011.
    18. Takeo Hori & Masako Ikefuji & Kazuo Mino, 2015. "Conformism And Structural Change," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(3), pages 939-961, August.
    19. Lee, Jong-Wha & McKibbin, Warwick J., 2018. "Service sector productivity and economic growth in Asia," Economic Modelling, Elsevier, vol. 74(C), pages 247-263.
    20. Berlingieri, Giuseppe, 2013. "Outsourcing and the rise in services," LSE Research Online Documents on Economics 51532, London School of Economics and Political Science, LSE Library.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    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:jqecon:v:23:y:2025:i:3:d:10.1007_s40953-025-00452-y. 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.