Development Economics Seminar

Du 04/04/2018 de 16:30 à 18:00

salle R2-01, campus Jourdan, 48 boulevard Jourdan 75014 Paris

LANJOUW Peter (VU University, Amsterdam )

The Distributional Consequences of Structural Transformation: The Experience of a North Indian Village over Six Decades

The village of Palanpur in Uttar Pradesh, North India, has been the subject of close study by researchers since the late 1950s. Himanshu, Lanjouw and Stern (forthcoming) assemble detailed quantitative and qualitative data over the period 1957/8 to 2015 to document the village economy’s evolution over these six decades and to link this to developments occurring at the regional, as well as all-India level. The data reveal that Palanpur has transformed from a largely closed, small-holder, farming community into a highly diversified economy, where non-agricultural income now accounts for the bulk of village income. This process of structural transformation has followed clear stages, with agricultural intensification and productivity growth during the 1960s and 1970s preceding a subsequent shift into non-farm activities. The “Green Revolution” stage was associated, in Palanpur, with rising incomes, falling poverty and a decline in income inequality. This latter finding occurred as a result of land reforms that were introduced just prior to the first survey of Palanpur in 1957, and because of the progressive impact of the expansion of irrigation whereby previously rain-fed farming households were able to “catch up” to those initially able to achieve multiple crops per year on their irrigated land. The second, diversification, stage occurred as productivity gains in agriculture slowed while a growing population continued to exert pressure on per capita incomes. Villagers’ horizons expanded beyond the village as commuting to nearby towns and villages accelerated. Although most of the new jobs and economic activities were casual and only moderately remunerative, they were sufficient to maintain the trend of rising per capita incomes and falling poverty. However, income inequality in this second stage increased sharply. A further striking finding is that across the two stages of transformation, inter-generational income mobility appears to have fallen: fathers’ incomes during the diversification stage have become better predictors of their sons’ incomes than during the agricultural intensification stage. We enquire, on the basis of a stylized model of the Palanpur economy and its recent evolution, whether the distributional outcomes observed could plausibly also be occurring in other, similar, villages. If the Palanpur findings - of falling poverty and rising incomes being accompanied by sharply widening village-level inequality - were to be widely repeated, they could presage a deceleration and possibly even reversal of some of the encouraging trends of rising rural living standards in Uttar Pradesh and North India more generally.