Informal Sector and the Developing World: Relating Theory and Evidence to India

Sugata Marjit and Saibal Kar

in The Oxford Handbook of the Indian Economy

Published in print March 2012 | ISBN: 9780199734580
Published online November 2012 | | DOI:

Series: Oxford Handbooks

 Informal Sector and the Developing World: Relating Theory and Evidence to India

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This article aims to account for the pattern of structural transformation seen in the Indian economy during the period 1970–2007. It develops a three-sector general equilibrium model consisting of agriculture, industry, and services. Output in each sector is produced using capital, labor, and land (in agriculture). The production function in each sector is assumed to be Cobb-Douglas, and different values of capital and labor shares are allowed for as well as different growth rates of total factor productivity (TFP) across the sectors. Using sectoral data, sector-specific TFP growth rates are calculated which are fed exogenously into the model with the objective of examining the model's performance with respect to the evolution of sectoral value-added shares as well as sectoral employment shares over the sample period.

Keywords: structural transformation; Indian Economy; economic growth; sectoral data; total factor productivity; annual wage growth

Article.  6703 words. 

Subjects: Economics ; Economic Development and Growth

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