War Mobilization and Economic Development: World War II and Structural Transformation in India
Can temporary wartime mobilization change the long-run development trajectory of an economy? We study how mobilization for World War II in colonial India influenced its subsequent development. From 1939 to 1945, the British colonial government purchased massive amounts of war materiel within India. We study long-run impacts on structural transformation—the transition of employment from agriculture to modern sectors (industry and services)—in Indian districts. Causal identification takes a shift-share approach, exploiting variation across industries in war-related government orders, and variation across districts in their pre-war industrial structure. We find that World War II economic mobilization had positive and significant impacts on long-run development. More than six decades later, districts with higher procurement of war materiel saw greater structural transformation from agriculture towards industry and services, and higher consumption levels, urbanization rates, and in-migration. We find substantial spillovers on services sectors not directly subject to procurement. The majority of structural transformation effects are driven by procurement of heavy industrial goods.
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