The Indian Economy Blog

November 16, 2006

The Economics Of Don

Filed under: Economic History,Growth,Human Capital,Media & Economics — Nitin @ 7:56 am

Anthony, the third member of the Amar-Akbar-Anthony gang watched the remake of Don recently and came away with the following thoughts:

In 1978, Vijay earned 11.75 rupee after singing the whole day. In 2006, he earns 3,000 rupee in three days — that’s 1,000 rupee a day. This is an 85-fold (or 8,411%) increase. According to the IMF data, prices have gone up by 7¼ to 8½ fold (or a maximum of 740%) depending on the measure. That is, the real wage of a busker has increased 10-fold in the past 28 years. Now, in the long run, real wage can only increase if there is an improvement in productivity, and it is hard to see exactly what revolutionary technological change could have occurred in the busking industry. But one can invoke the Balassa-Samuelson effect and argue that perhaps there has been a 10-fold productivity increase in the industries where Vijay could have worked had he not been busking. If this explanation is right, then according to the movie, the living standard in Bombay has increased 10-fold in these years, compared with a mere 3-fold increase in the country’s per capita income. Regardless of what Bhagwati says, that kind of rise in inequality is bound to cause trouble. [Amar Akbar Anthony]

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