Accounting for Wage Inequality in India

This paper investigates the evolution and structure of wage inequality among adult male workers engaged in regular and casual wage employment in India during a period of radical economic change. The analysis exploits data from nationally representative employment surveys and uses decomposition techniques to examine the role played by educational achievement and industry affiliation. This paper finds that there are striking differences for the two groups of workers. Wage inequality rose between 1983 and 1999 among regular workers but fell among casual workers. While human capital (as embodied in age and education) is one of the major factors explaining both the level of and change in regular wage inequality, geographic location is the key determinant of casual wage inequality. Industry affiliation plays an equally important role for both sets of workers. These are also consistently the most important contributors to changes in inequality though the directional effects differ among the different sets of workers.India, wage inequality, inequality decomposition, segmented labour market

The Structure of Wages in India, 1983-1999

This paper examines the structure of wages for adult male workers within a dual labour market framework using micro survey data for three years spanning almost two decades. Augmented Mincerian wage equations are estimated for different types of workers – those with regular wage or salaried jobs and those with casual or contractual jobs - using a set of human capital measures and a variety of worker, industry and state characteristics after correcting for potential selection bias. This paper finds that the returns to education and experience are significantly different for these two types of workers consistent with the notion of segmented labour markets - while casual workers face at best flat returns the returns for regular workers are positive and rising in education level. There is some evidence of significant changes in the returns to education for regular workers over time. The widening of the gap between graduate and primary education and the rise in wage inequality could possibly be a consequence of trade liberalisation and other reforms pursued during the 1990s.wages, returns to education, segmented labour markets, India

Trade and wages evidence from India, 1983-1999

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The Performance of Social Pensions in India: The Case of Rajasthan

The Government of India has recently announced a dramatic expansion of social pension schemes both in terms of coverage and benefit levels. Yet relatively little is known about how these programs are administered or how well they achieve their objectives. This paper assesses the performance of a social pension scheme in the Indian state of Rajasthan. In particular, the authors review the experience with respect to program awareness, coverage, targeting, and leakage as well as delivery mechanisms. The overall assessment is positive and holds broader lessons for social assistance in India. Thus, transaction costs once pensions are sanctioned are low, disbursements are largely as per schedule, leakage in the form of shortfalls in benefits is generally low, and satisfaction levels with the social pension scheme are high. At the same time there are clear areas for improvement on both the policy and administration side. There is evidence of under coverage and high transaction costs associated with the application process. Though targeting is generally progressive, especially for old age and widow pensions though less so for disability pensions, targeting is far from perfect and the eligibility criteria are not strictly enforced. There is a strong case for relaxing, rationalizing, and clarifying some of the existing criteria. On the administration front, several basic issues relating to implementation need to be addressed, particularly with respect to transaction costs in the sanction of pensions, wide inter-district variations in performance within the state, and inadequate record-keeping and monitoring

The Gender Pay Gap and Trade Liberalisation: Evidence for India

This paper uses nationally representative employment surveys to examine the magnitude of the gender pay gap in India and its relationship to a set of trade liberalisation measures. Separate wage equations, corrected for selection bias, are estimated for men and women in wage employment. Conventional index number procedures are used to decompose the gender pay gap into ‘endowment’ and ‘treatment’ components. The ‘treatment’ components comprise about one-third of the overall wage gap – a result in comport with the existing evidence for India. There is some evidence that the ‘treatment’ or residual components are declining over time but the point estimates for the differentials in these components between the initial and terminal years of our analysis are found to be imprecisely determined. A methodology suggested by Horrace and Oaxaca (2001) is used to compute industry specific gender pay gaps and their relationship with selected trade-related measures (e.g., tariff rates and trade ratios) is then examined econometrically within a GLS framework. We find little evidence that the trade-related measures are important determinants of the industry-level gender pay gap and appear to have exerted a relatively benign influence on the evolution of the industry gender pay gap in India over the last two decades.gender pay gap, trade liberalisation, India