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Over the past 25 years there has been a remarkable economic catch-up by scheduled castes and tribes (SC/STs) towards non-SC/ST levels in the terms of their education attainment levels, their occupation choices as well as wage and consumption levels. This is remarkable given the centuries of socio-economic deprivation faced by these backward castes. In this paper we Örst document these facts and then examine the relative contributions of di§erent factors, in particular, aggregate and sectoral shocks, toward this catch-up. We then develop a multi-sector model with the two types of agents to show that aggregate TFP shocks can induce a convergence between the two groups without any other concurrent redistributive policy changes as long as there exists an initial policy of education subsidies for the relatively disadvantaged group.

link: http://econ.la.psu.edu/papers/Lahiri102611.pdf