Structural Transformation and the Rural-Urban Divide

Development of an economy goes hand in hand with a declining importance of agriculture in output and employment. Given the primarily rural population in developing countries and their concentration in agrarian activities, this has potentially large implications for inequality along the development path. The paper examines the Indian experience between 1983 and 2010, a period when India has been undergoing such a transformation. A significant decline is noted in the wage differences between individuals in rural and urban India during this period. However, individual characteristics such as education, occupation choices and migration account for at most 40 percent of the wage convergence.