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We have developed a three-sector dynamic general equilibrium model and calibrated its parameters to align with the output and employment share data of the Indian economy from 1983 to 2012. The model’s output on employment share indicates that the actual labour share in the secondary and tertiary sectors is relatively lower compared to the model-predicted share. To understand the origins of labour productivity growth, we have conducted a shift-share analysis. Our findings reveal that within-sector productivity growth is the most significant contributor to overall growth, and the importance of total factor productivities (TFPs) has increased in the post-economic reform period, particularly after 1991. While the contribution of TFPs in the manufacturing sector has been moderate, our results emphasize the pressing need for reforms to boost the TFP in this sector. In general, the economic reforms implemented in 1991–92 have facilitated a more efficient allocation of productive factors across different sectors of the Indian economy.

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Does the Productivity Growth Numbers Explain the Unbalanced Growth Experience of the Indian Economy?

  • 章节

  • 发表日期：

    2025年

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  • T Thasni,
  • Kausik Gangopadhyay,
  • Debasis Mondal

摘要

We have developed a three-sector dynamic general equilibrium model and calibrated its parameters to align with the output and employment share data of the Indian economy from 1983 to 2012. The model’s output on employment share indicates that the actual labour share in the secondary and tertiary sectors is relatively lower compared to the model-predicted share. To understand the origins of labour productivity growth, we have conducted a shift-share analysis. Our findings reveal that within-sector productivity growth is the most significant contributor to overall growth, and the importance of total factor productivities (TFPs) has increased in the post-economic reform period, particularly after 1991. While the contribution of TFPs in the manufacturing sector has been moderate, our results emphasize the pressing need for reforms to boost the TFP in this sector. In general, the economic reforms implemented in 1991–92 have facilitated a more efficient allocation of productive factors across different sectors of the Indian economy.