The Link Between Manufacturing Growth and Accelerated Services Growth in India

Rajeev Dehejia and Arvind Panagariya
Economic Development and Cultural Change, Volume 64, Number 2 (January 2016), pp. 221-264.

The impact of trade liberalization on manufacturing growth has been widely studied in the literature. What has gone unappreciated is that accelerated manufacturing growth has also been accompanied by accelerated services growth. Using firm-level data from India, we find a positive spillover from manufacturing growth to gross value added, wages, employment, and worker productivity in services, especially large urban firms and in service sectors whose output is used as a manufacturing input.

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Wagner Faculty