Redistribution,demand structure and factor requirements: The case of India

This paper investigates the hypothesis that a redistribution of private consumption expenditure from rich to poor, or from urban residents to rural residents, would bring about an increase in employment and reduce capital and import requirements, through its impact on the structure of aggregate demand. The simulations reported here, using Indian data, do not provide much support for the ‘redistribution promotes employment’ argument. The analysis suggests that even ‘radical’ redistributions of private consumption expenditure would have no significant impact on the level of employment, either directly through increasing labour requirements or indirectly through reducing scarce resource requirements.