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Inclusive Growth and Social ChangeFormal-Informal-Agrarian Relations in India$
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Saumya Chakrabarti

Print publication date: 2016

Print ISBN-13: 9780199466061

Published to Oxford Scholarship Online: June 2016

DOI: 10.1093/acprof:oso/9780199466061.001.0001

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Formal–Informal Interlinkages in a Resource-Constrained Economy

Formal–Informal Interlinkages in a Resource-Constrained Economy

A Study on India

(p.367) 7 Formal–Informal Interlinkages in a Resource-Constrained Economy
Inclusive Growth and Social Change

Saumya Chakrabarti

, Anirban Kundu
Oxford University Press

Empirical investigation of this chapter depicts that a short-run agricultural supply rigidity in the economy gives rise to a fundamental growth conflict between formal-informal manufacturing in India. Preliminary analysis from the input-output transaction table reveals that agricultural input intensities are higher for informal industries compared to formal one, which indicates the fact that agricultural supply rigidity would affect the growth of informal sector relatively more than that of formal sector. Further, two-stage least square instrumental variable estimate shows that irrespective of all segments of the informal sector across rural and urban settlements, an inverse relationship between the growth of formal sector and informal sector exists while controlling the agricultural output supply. Further, the result shows that increasing share of agricultural inputs used by the formal sector brings down the growth of informal sector while controlling the supply of agricultural output.

Keywords:   informal manufacturing, farm-nonfarm linkage, input-output analysis, two-stage least square estimate, agricultural supply constraint, formal-informal conflict

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