Advanced Search
MyIDEAS: Login to save this article or follow this journal

Wage–productivity differentials and Indian economic efficiency

Contents:

Author Info

  • Sahoo, Amarendra
  • ten Raa, Thijs

Abstract

A frontier-general equilibrium analysis with skill transformation evaluates the productivities of skilled and unskilled labor and potential of the Indian economy. We compare the wages of skilled and unskilled labor between 1994 and 2002 with their respective productivities over this period. Education is considered to be responsible for the skill formation over this period: the change in skilled labor supply is endogenous in the model. Compared to its productivity, skilled labor is underpaid in the initial period and overpaid in the second period. Unskilled labor is underpaid in both periods. A decomposition exercise shows that skilled labor gains from free trade, and stands to lose due to education and domestic competition in the second period. The annualized rate of return to education is between 7 and 10%. The economy operates below its potential in both periods, particularly in the second—due to trade limitations and the failure to capture the return to education. Service sectors are found to have potential to grow significantly.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S0264999311002598
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 29 (2012)
Issue (Month): 2 ()
Pages: 341-348

as in new window
Handle: RePEc:eee:ecmode:v:29:y:2012:i:2:p:341-348

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords: Competitive pressure; Wage and productivity inequality; Efficiency; Returns to education; Frontier-general equilibrium analysis; Multiplicative decomposition; Skill formation; Trade efficiency;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Puja Vasudeva Dutta, 2005. "Accounting for Wage Inequality in India," PRUS Working Papers 29, Poverty Research Unit at Sussex, University of Sussex.
  2. Barry Bosworth & Susan M. Collins & Arvind Virmani, 2006. "Sources of Growth in the Indian Economy," India Policy Forum, Global Economy and Development Program, The Brookings Institution, vol. 3(1), pages 1-69.
  3. Shanmugam, K. R., 2006. "Rate of time preference and the quantity adjusted value of life in India," Environment and Development Economics, Cambridge University Press, vol. 11(05), pages 569-583, October.
  4. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  5. Prescott, Edward C., 1986. "Theory ahead of business-cycle measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 11-44, January.
  6. Katz, L.F. & Murphy, K.M., 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," Harvard Institute of Economic Research Working Papers 1580, Harvard - Institute of Economic Research.
  7. Sugata Marjit & Hamid Beladi & Avik Chakrabarti, 2004. "Trade and Wage Inequality in Developing Countries," Economic Inquiry, Western Economic Association International, vol. 42(2), pages 295-303, April.
  8. Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997. "Capital-skill complementarity and inequality: a macroeconomic analysis," Staff Report 239, Federal Reserve Bank of Minneapolis.
  9. Ang, B.W. & Liu, F.L. & Chung, Hyun-Sik, 2004. "A generalized Fisher index approach to energy decomposition analysis," Energy Economics, Elsevier, vol. 26(5), pages 757-763, September.
  10. Thijs Raa & Pierre Mohnen, 2002. "Neoclassical Growth Accounting and Frontier Analysis: A Synthesis," Journal of Productivity Analysis, Springer, vol. 18(2), pages 111-128, September.
  11. Finn E. Kydland & Edward C. Prescott, 1996. "The Computational Experiment: An Econometric Tool," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 69-85, Winter.
  12. W. Jill Harrison & J. Mark Horridge & K.R. Pearson, 1999. "Decomposing Simulation Results with Respect to Exogenous Shocks," Centre of Policy Studies/IMPACT Centre Working Papers ip-73, Victoria University, Centre of Policy Studies/IMPACT Centre.
  13. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  14. Williamson, Jeffrey G., 1999. "Real wages, inequality and globalization in latin america before 1940," Revista de Historia Económica, Cambridge University Press, vol. 17(S1), pages 101-142, March.
  15. Christopher A. Sims, 1996. "Macroeconomics and Methodology," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 105-120, Winter.
  16. Puja Vasudeva Dutta, 2004. "Trade Protection and Inter-industry Wages in India," PRUS Working Papers 27, Poverty Research Unit at Sussex, University of Sussex.
  17. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-51, September.
  18. Gordon H. Hanson & Ann Harrison, 1999. "Trade liberalization and wage inequality in Mexico," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 52(2), pages 271-288, January.
  19. Nirupam Bajpai & Jeffrey Sachs, 1997. "India's economic reforms: some lessons from East Asia," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 6(2), pages 135-164.
  20. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  21. Jung, Hong-Sang & Thorbecke, Erik, 2003. "The impact of public education expenditure on human capital, growth, and poverty in Tanzania and Zambia: a general equilibrium approach," Journal of Policy Modeling, Elsevier, vol. 25(8), pages 701-725, November.
  22. Lars Peter Hansen & James J. Heckman, 1996. "The Empirical Foundations of Calibration," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 87-104, Winter.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:29:y:2012:i:2:p:341-348. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.