Trade, Development, and Political Economy Present: Structural Transformation and the Rural-Urban Divide

Trade, Development, and Political Economy Present: Structural Transformation and the Rural-Urban Divide by Amartya Lahiri

Speaker: AmartyaLahiri
(University of British Columbia)
Authors: ViktoriaHnatkovskaand AmartyaLahiri

Abstract: Development of an economy typically goes hand-in-hand with a declining importance of agriculture in output and employment. Given the primarily rural population in developing countries and their concentration in agrarian activities, this has potentially large implications for inequality along the development path. The authors examine the Indian experience between 1983 and 2010, a period when India has been undergoing such a transformation. They find a significant decline in the wage differences between individuals in rural and urban India during this period. However, individual characteristics such as education, occupation choices and migration account for at most 40 percent of the wage convergence. The authors use a two-sector model of structural transformation to rationalize the rest of the rural-urban convergence in India as the consequence of two factors: (i) differential sectoralincome elasticitiesof demand along with productivity growth; and (ii) higher labor supply growth in urban areas. Quantitative results suggest that the model can account for 70 percent of the unexplained wage convergence between rural and urban areas.

Short Bio:AmartyaLahiriis the Royal Bank Faculty Research Professor of Economics and holds the JohalChair of Indian Research at the University of British Columbia. His research interests are in International Economics and Macroeconomics. His work has been published in top general-interest and field journals such as the Journal of Political Economy, Economic Journal, Journal of Monetary Economicsand the Journal of International Economics.

Monday, October 7, 2013
4:00 pm
341 Eggers Hall