Premature deindustrialisation and growth slowdowns in middle-income countries

Ravindran, Rekha; M, Suresh Babu

doi:10.1016/j.strueco.2022.04.001

Cited by 8 publications

(2 citation statements)

References 41 publications

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“…The change in sectoral composition is somewhat smaller, but still significant at the aggregate level (see figure 5). Carbon pricing results in a decline in the manufacturing sector share due to the sector's high share of energy and emission intensive production, and because India is able to import manufactured goods to meet its demand from countries with a more competitive and greener production 20 . Output shares of the agricultural and service sectors consequently increase.…”

Section: Discussionmentioning

confidence: 99%

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Macroeconomic structural change likely increases inequality in India more than climate policy

Leimbach,

Hübler,

Mahlkow

et al. 2024

Environ. Res. Lett.

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The decarbonization of India’s economy will have different effects across income groups. As India is in the middle of the transformation process from an agriculture-based economy towards an industry- and service-based economy, called economic structural change, the extent of income distribution across households strongly depends also on the speed of economic transformation. While a number of recent studies have analyzed the distributional effects of carbon pricing, the specific role of structural change across sectors has not been in the focus of the related literature. Our study contrasts distributional effects from climate policy with distributional effects from structural change in India and asks how far carbon pricing supports or hinders structural change and development. We develop and apply a comprehensive model framework that combines economic growth and international trade dynamics related to structural change with detailed household income and expenditure data for India. Our study shows that changes in income and inequality due to carbon pricing vary with the changes in the sectoral structure of economies. Our results indicate that carbon pricing tends to delay economic structural change by retarding the reallocation of economic activities from the agricultural sector to the manufacturing sector. Furthermore, the results emphasize that the increase in inequality due to structural change is substantially stronger than due to carbon pricing. Consequently, socially sensitive policies supporting the process of structural transformation appear to be more important for poor households than lowering climate policy ambitions.

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Section: Discussionmentioning

confidence: 99%

“…We introduce this phenomenon in the field of climate policy modelling and distributional analyses of climate policy effects. This includes an inherent focus on future developments, which distinguishes this study from the rich literature on structural change and inequality, which is mainly empirical [18][19][20].…”

Section: Introductionmentioning

confidence: 99%