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GTAP Resource #4505

"Demographic Transition, Education, and Inequality in India"
by Medvedev, Denis, Maurizio Bussolo and Kathryn Vasilaky

India is entering demographic transition much later than most developing countries, and will still be a relatively young nation twenty years from now. As the population ages and younger, better-educated cohorts enter the workforce, the average schooling of the working age population will increase by at least a full year even with no further improvements in the educational attainment of today’s youth and could rise much faster if further progress is achieved on the education agenda.

While the shift in labor supply composition towards skilled labor is likely to have positive effects on overall productivity, the evolution of returns to skills – and, consequently, inequality – will depend critically on changes in demand for these workers. A growing number of analysts have questioned whether the supply and quality of jobs will be sufficient for the new workforce entrants to take advantage of the demographic dividend (see, for example, Government of India Economic Survey, 2013). While the supply effect can be largely thought of as exogenous – driven by expected demographic trends and the observed differences between the educational attainments of the young and the old – the ability of the economy to absorb the rising share of skilled workers will depend on the speed as well as sectoral pattern of economic growth. Furthermore, the evolution of returns to skilled labor – as an outcome of the supply and demand interactions – will determine the evolution of inequality and the shape of India’s income distribution.

To address these questions in a consistent framework, this paper links a computable general equilibrium (CGE) model of India with household survey data from India’s National Sample Survey Organization (NSSO) in a simple micro-simulation framework. The recursive-dynamic CGE model has a 2011 base year (corresponding to Indian FY2011/12), seven broad categories of economic activity with varying skill intensities, and three factors of production (unskilled l...

Resource Details (Export Citation) GTAP Keywords
Category: 2014 Conference Paper
Status: Published
By/In: Presented at the 17th Annual Conference on Global Economic Analysis, Dakar, Senegal
Date: 2014
Created: Medvedev, D. (4/15/2014)
Updated: Medvedev, D. (4/15/2014)
Visits: 2,290
- Demographics
- Economic analysis of poverty
- Labor market issues
- Asia (South-Central)

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Special Instructions
Please note that draft paper is a work in progress; numbers are likely to change and a revised version will be uploaded prior to to the conference

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