Labour Reallocation Effect in Haryana: A District-Level Analysis of Lewis Turning Point
Abstract
This study investigates whether Haryana has reached to a stage of economic development where the marginal productivity of labor is equal to its price (LTP). We observed that Haryana’s economic growth is mainly attributable to the development of the non-agricultural (industrial and service) sector, driven by rapid labor migration and gross fixed capital formation in secondary and tertiary sectors. Secondly, we evaluate the effect of labor reallocation away from agriculture to non-agriculture by comparing the labor productivities of the two sectors by applying the Labor Reallocation Effects (LRE) equation specified by the World Bank (1996). This study concluded that the MPL of the non-agricultural sector is higher than the agricultural sector, and some districts have achieved the level where the MPL of the agriculture sector is higher than the institutional wage rate. The analyses concluded that Haryana's economy has entered in LTP stage of economic development. The surplus labor from the agriculture sector to the non-agriculture sector has been absorbed in Haryana.
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