Growth, Employment and Structural Change: Punjab Versus 16 Major States of India

This paper studies the decomposition of GSDP growth per capita in Punjab via-a-vis 15 other states in India during 1993–94 and 2011–12 in terms of employment and productivity growth. Specifically, it focuses on the role of employment growth and structural

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Growth, Employment and Structural Change: Punjab Versus 16 Major States of India Aradhna Aggarwal

11.1

Introduction

There is a general consensus that the unprecedented growth in GDP in India in the post 1990 period has not been accompanied by commensurate growth in employment. It is termed as “jobless growth”. There is emphasis in the policy debate that jobless growth has been responsible for the disappointing results in reducing poverty. However, according to an emerging economic thinking, emphasis should be placed not only on increasing employment levels per se but also on its sectoral composition (Wang and Szirmai 2008; Timmer and Szirmai 2000; Macmillan and Rodrik 2011; Aggarwal and Kumar 2012 for a detailed survey). The ‘New Structural Economics’, as it has come to be known as, emphasises that the basic cause of low growth–low growth circle is that the labour force is trapped into low-productivity sectors. An expansion of more productive and dynamic sectors can push the economy into a virtuous circle in which the growth of productive employment, productive capacities and earnings mutually reinforce each other to accelerate growth and reduce poverty. Thus, labour flows from low-productivity activities to high-productivity activities are a key driver of sustained economic growth and development. Following the emergence of this thinking, there has been growing interest in the analysis of structural change in the economy as a mechanism of sustained growth (Dietrich 2009; Cortuk and Singh 2011; Macmillan and Rodrik 2011). The advent of this thinking within the realm of the “New Structural Economics” has prompted a stream of empirical literature which focuses on systematically unpacking the relationship between economic growths on the one hand and, employment and structural change in employment on the other (see, for

A. Aggarwal (&) Department of International Economics and Business, Asia Research Centre, Copenhagen Business School, Porcelenshaven 24A, 1-4.sal, 2000 Frederiksberg Copenhagen, Denmark e-mail: [email protected]; [email protected] © Springer Science+Business Media Singapore 2016 L. Singh and N. Singh (eds.), Economic Transformation of a Developing Economy, India Studies in Business and Economics, DOI 10.1007/978-981-10-0197-0_11

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instance, Gutiérrez et al. 2009).1 This literature discards the traditional employment elasticity approach of analyzing the relationship between growth and employment (i.e. the percentage change in employment in response to 1 % change in output) because the latter says nothing about the changes in the structure of labour force. While contributing to this line of the literature, the present study uses Shapley decompositions to analyse the structural change in employment over the period from 1993–94 to 2011–12 and its contribution to economic growth in 16 major states with special reference to Punjab. By structural change in employment we mean inter-sectoral movement of labour. The Indian economy has witnessed two different policy regimes since in