Centre for Development Economics
Department of Economics, Delhi School of Economics


Urbalization, Structural Transformation and Rural-Urban Disparities


Amartya Lahiri
University of British Columbia and CAFRAL


11th January, 2018 (Thursday) at 3:00 PM

Venue : Seminar Room (First Floor)
Department of Economics, Delhi School of Economics

All are cordially invited

Over the past three decades India and China have experienced rapid economic growth along with a structural transformation of their economies from agriculture towards manufacturing and services. Underneath the overall similarity however is one significant difference: rural-urban wage gaps have been declining in India while they have widened in China. Crucially, in both countries, the majority of these wage gap dynamics are left unexplained by worker attributes. We formalize a two-sector-two-location model in which both structural transformation and urbanization respond endogenously to sectoral and aggregate productivity shocks. While the structural transformation effect tends to widen the urban-rural wage gap, the urbanization effect tends to reduce it. We show that the model can quantitatively account for both the wage convergence in India as well as the wage divergence in China.

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