Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Jul, 2023, Volume 91, Issue 4

Growing Like India—the Unequal Effects of Service-Led Growth
p. 1457-1494

Tianyu Fan, Michael Peters, Fabrizio Zilibotti

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 nontradable 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.

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Supplemental Material

Supplement to "Growing Like India. The Unequal Effects of Service-Led Growth"

Tianyu Fan, Michael Peters, and Fabrizio Zilibotti

This online appendix discusses the technical material referred to in the text

Supplement to "Growing Like India. The Unequal Effects of Service-Led Growth"

This zip file contains the replication files for the manuscript.

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