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Growing Like India: The Unequal Effects of Service-Led Growth

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Structural transformation in most currently developing countries takes the form of a rapid rise in services but limited industrialization. In this paper, we propose a new methodology to structurally estimate productivity growth in service industries that circumvents the notorious difficulties in measuring quality improvements. In our theory, the expansion of the service sector is both a consequence—due to income effects—and a cause— due to productivity growth—of the development process. We estimate the model using Indian household data. We find that productivity growth in non-tradable consumer services such as retail, restaurants, or residential real estate, was an important driver of structural transformation and rising living standards between 1987 and 2011. However, the welfare gains were heavily skewed toward high-income urban dwellers.

About the Speaker

Satish Deodhar

Satish Deodhar is the professor of economics at the Indian Institute of Management Ahmedabad. Previously, he has worked on imperfectly competitive market structures, World Trade Organization (WTO), agricultural trade, food quality, and CSR issues. He has conducted research projects for India’s Ministry of Food Processing Industry, Ministry of Agriculture, Indian Bank, and Economic Research Service of the US Department of Agriculture. He was selected as the Hewlett Fellow of the International Agricultural Trade Research Consortium during 2006-2008. Prof. Deodhar was the recipient of the Outstanding Ph.D. Dissertation Award from the US Food Distribution Research Society, and has been honoured with the Dewang Mehta Best Professor of Economics Award in 2012 and 2015 by the Business School Affaire. He has also been the recipient of the Distinguished Young Professor Award for Excellence in Research from IIMA.

He has held many administrative positions at IIMA including Admission Chair, PGP Chair, Placement Chair, PGPX Chair, Welfare Chair, and Warden. He is a Life Member of the Association of Food Scientists and Technologists (India), and serves on the advisory board of Savida Agri-com Ltd. He was on the board of Asian Granito Ltd., as an independent director. He was also instrumental in bringing out the commemorative postal stamp by India’s Department of Post in memory of the 18th century Indian statesman, Bajirao Peshwa I.

He has authored quite a few monographs and books. One of his books, Day to Day Economics, which he wrote for the IIMA Random House Business Book Series, has gone on to become a national bestseller in non-fiction category with more than 60,000 copies sold till date. Prof. Deodhar was the pioneer Convener of the largest annual computerized common admission test (CAT) conducted by IIMs for admissions to management schools.

He completed his bachelor’s and master’s in economics from the Gokhale Institute of Politics and Economics, Pune, and received Ph.D. in Agricultural Economics from The Ohio State University.

Fabrizio Zilibotti

Fabrizio Zilibotti is the Tuntex Professor of International and Development Economics at Yale University. He is a fellow of the Econometric Society and a past recipient of the Yrjö Jahnsson medal (best economist under 45 in Europe). He is a former editor of Econometrica, the Review of Economic Studies, and the Journal of the European Economic Association. He was the president of the European Economic Association in 2016.

His research interests include economic growth, development, technical change, inequality, and family economics. He has published articles in all leading economics journals. He is a co-author of the book "Love, Money, and Parenting" (with Doepke) published by Princeton University Press in 2019 and translated in several foreign languages. His has published several articles on the economic growth of emerging economies, especially China. He received the Sun-Ye-Fang prize (the most prestigious economics award in China) for his article "Growing Like China," with Song and Storesletten, published in the American Economic Review 2011. He has also published articles on the economic development of India, most notably, "The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India” (with Aghion, Burgess, and Redding), published in the American Economic Review 2008; and "Growing Like India: The Unequal Effects of Service-Led Growth” (with Fan and Peters), in press at Econometrica.