Impact of labour productivity on structural transformation and economic growth: A state‐level analysis

During the 90th and 20th century, India underwent a remarkable phase of growth and employment generation. Unlike the usual pattern of structural shift, India experienced a shift away from agriculture to services, which become the backbone of India's growth trajectory. Using shift‐share analysis, this paper tries to find out the pattern of structural change in India's five Southern States and contribution of labour productivity towards this structural shift. I find that all the South Indian states witnessed a service lead growth with a high‐labour productivity growth. I also find that the main driver of productivity surge in all the Southern States of India was within‐sector productivity growth whereas sectorial reallocation effects being the important part of productivity growth.