Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/202190
Structural transformation in India: The Role of the Service Sector
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Contrary to the experience of industrialized countries, productivity growth of Indian services has been consistently faster than manufacturing. In this paper, I document that (i) the fastest growing industries in services grow faster than in manufacturing; (ii) faster productivity growth in services than in manufacturing is not because of sluggish manufacturing productivity; (iii) the supply of skilled workers in India is skewed towards tertiary education and (iv) the service sector is the most skill intensive; (v) returns to schooling are larger for the high-productivity services. To quantify and rationalize these facts, I construct a multi-sector model of estructural change with high and low-skilled workers. The calibrated model suggests that the large supply of high-skill workers combined with higher skill intensity in the service sector seem to be behind the services take-off. The data imply that service sub-sectors are gross substitutes while manufacturing sub-sectors are gross complements. This will accelerate productivity growth in services and decelerate productivity growth in manufacturing.
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SERRANO QUINTERO, Rafael. Structural transformation in India: The Role of the Service Sector. UB Economics – Working Papers. 2023. Vol. E23/451. [consulted: 10 of June of 2026]. Available at: https://hdl.handle.net/2445/202190