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EJCE Year: 2015, December. Volume: 12 - Issue: 2

Structural Change, Globalization and Economic Growth in China and India

by Vittorio Valli ; Donatella Saccone

Start page: 133 - End page: 163

Keywords: Structural change; globalization; economic growth; China's economy; India's economy

Jel code: O11; O53; O57; P51

DOI: 10.25428/1824-2979/201502-133-163

Abstract:

In their period of rapid economic growth China and India have experienced profound structural transformations. The aim of the paper is to analyze the relation between structural change, the process of globalization and economic growth in the two great Asian countries, using a highly disaggregated dataset for the 1987-2009 period. While China had a longer and more intensive productivity growth than India, the latter had a somewhat more balanced growth. Both countries registered higher within-sectors gains in productivity than between-sectors ones. Our analysis also shows that there exist important feedbacks between structural change, globalization and economic growth over time. When the reallocation of labor is large, it may positively impact on the future rates of economic growth. At the same time, however, it seems that a too rapid economic growth may hinder a smooth reallocation of labor. In both countries, new policies should be designed to favor labor movement across sectors and areas, to reduce the wage-productivity differentials and to integrate the informal sector in formal markets in India, in order to foster structural changes and enhance economic growth. If a too unbalanced economic growth has somewhat limited the extent of structural change, globalization has on the contrary promoted it. High level of export, import and FDI not only has been related to higher rates of economic growth, but also to a deeper reallocation of resources across sectors, modifying the comparative advantage and reorganizing the production.

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