Missing Linkages and Jobless Growth in India: An Econometric Analysis

Abstract

This study aims to empirically validate the theories of missing linkages among major economic sectors (agriculture, industry and service) and jobless growth in the context of Indian economy using the RBI‐KLEMS database for the period 1980–2018. The study employs the ARDL framework to identify both short‐run and long‐run relationships between sectoral employment elasticity and sectoral share of value‐added with other covariates (specifically macroeconomic factors). Our empirical findings validate the prevalence of theory of missing linkages and jobless growth. Further, we found that weak linkages exist between agriculture, industry and service sectors. However, industry and services have strong interlinkages, whereas industry and agriculture have weak linkages, which leads to weak linkages between services and agriculture. Additionally, it was observed that macroeconomic factors do not exhibit a short‐term relationship with employment elasticities in explaining missing linkages. In fact, macroeconomic factors demonstrate a substantial long‐term association. Based on these interlinkages, the study proposes the potential for policies to stimulate growth across sectors. Nonetheless, policies aimed at improving the productivity of the primary sector remain a prominent solution.