Pace of structural change and inter‐sectoral relative price: The case of India and China

Subhasankar Chattopadhyay

The World Economy, 2022, vol. 45, issue 11, 3534-3558

Abstract: Though the behaviour of output composition during structural change is highly stylised, the behaviour of the inter‐sectoral relative prices is not. We explore two related questions in the context of structural change in India and China (1950–2010). First, what factors determine changes in the inter‐sectoral relative prices during structural change and growth? Second, is there a link between the behaviour of the relative price and the ‘pace’ of structural change? We show that the overall pace of structural change has been much slower in India than in China. With the help of a two‐sector growth model comprising a traditional sector producing agricultural goods and a modern sector producing industrial commodities, we show that the slower pace can be explained by the way sectoral growth dynamics affect the behaviour of the relative price over time.

Date: 2022
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