Income Inequality in Rural India: Decomposing the Gini by Income Sources

This paper examines income inequality in rural India in 1993 and 2005. It attempts to ascertain the contribution of different income sources to overall income inequality, and change in their relative importance between 1993 and 2005 through decomposition of Gini coefficient. The paper finds that income inequality has increased between 1993 and 2005. Agriculture income continues to contribute majorly in total income and income inequality; however its share in total income and total income inequality has declined significantly. A marginal increase in agriculture and salaried income leads to increase in inequality; however, a marginal increase in labor income (both agriculture and non-agriculture) lead to reduction in the income inequality.Gini decomposition, income inequality, income sources, India

Are girls the fairer sex in India? Revisiting intra-household allocation of education expenditure

This paper revisits the issue of the intra-household allocation of education expenditure with the recently available India Human Development Survey which refers to 2005 and covers both urban and rural areas. In addition to the traditional Engel method, the paper utilizes a Hurdle model to disentangle the decision to enroll (incur any educational expenditure) and the decision of how much to spend on education, conditional on enrolling. Finally the paper also uses household fixed effects to examine whether any gender bias is a within-household phenomenon. The paper finds that the traditional Engel method often fails to pick up gender bias where it exists not only because of the aggregation of data at the household-level but also because of aggregation of the two decisions in which gender can have opposite signs. It is found that pro-male gender bias exists in the primary school age group for several states but that the incidence of gender bias increases with age – it is greater in the middle school age group (10-14 years) and greater still in the secondary school age group (15-19 years). However, gender discrimination in the secondary school age group 15-19 takes place mainly through the decision to enroll boys and not girls, and not through differential expenditure on girls and boys. The results also suggest that the extent of pro-male gender bias in educational expenditure is substantially greater in rural than in urban areas. Finally, our results suggest that an important mechanism through which households spend less on girls than boys is by sending sons to fee-charging private schools and daughters to the fee-free government-funded schools.Gender bias, educational expenditure, Engel curve, Hurdle model, India.

The Returns to English-Language Skills in India

India's colonial legacy and linguistic diversity give English an important role in its economy, and this role has expanded due to globalization in recent decades. It is widely believed that there are sizable economic returns to English-language skills in India, but the extent of these returns is unknown due to lack of a microdata set containing measures of both earnings and English ability. In this paper, we use a newly available data set - the India Human Development Survey, 2005 to quantify the effects of English- speaking ability on wages. We find that being fluent in English (compared to not speaking any English) increases hourly wages of men by 34%, which is as much as the return to completing secondary school and half as much as the return to completing a Bachelor's degree. Being able to speak a little English significantly increases male hourly wages 13%. There is considerable heterogeneity in returns to English. More experienced and more educated workers receive higher returns to English. The complementarity between English skills and education appears to have strengthened over time. Only the more educated among young workers earn a premium for English skill, whereas older workers across all education groups do.English Language, Human Capital, India

Simulating the Impact of the 2009 Financial Crisis on Welfare in Latvia

This note details simulations of the distributional impacts of the 2009 financial crisis on households in Latvia. It uses household survey data collected prior to the crisis and simulates the impact of the growth slowdown. The simulations show that Latvia experienced a sharp rise in poverty, widening of the poverty gap, and a rise in income inequality due to the economic contraction in 2009. The 18 percent contraction in gross domestic product (affecting mainly trade hotels and restaurants, construction, and manufacturing) likely led the poverty head count to increase from 14.4 percent in 2008 to 20.2 percent in 2009. The poverty gap, which measures the national poverty deficit, was simulated to increase from 5.9 percent in 2008 to 8.3 percent in 2009. The analysis finds that the results are robust to most assumptions except post-layoff incomes, which substantially mitigated household welfare. The authors also simulate the impact of Latvia's Emergency Social Safety Net components and find that the Safety Net likely mitigated crisis impacts for many beneficiaries. The simulations measure only direct short-run impacts; hence, they do not take into account general equilibrium effects. Post-crisis income data from a different data source suggest that poverty rates increased by 8.0 percentage points between 2008 and 2009. As a result, the authors suggest that their ex-ante simulation performs reasonably well and is a useful tool to identify vulnerable groups during the early stages of a crisis.Facultad de Ciencias Económica