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Is Self-Employment The Answer To Caste Discrimination? Decomposing The Earnings Gap In Indian Household Nonfarm Businesses

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  • Ashwini Deshpande

    (Department of Economics, Delhi School of Economics, Delhi, India)

  • Smriti Sharma

    (Department of Economics, Delhi School of Economics, Delhi, India)

Abstract

Using the India Human Development Survey data for 2004-05, we employ two methodologies to estimate the earnings structure of household nonfarm businesses owned by Scheduled Castes and Tribes (SCSTs) and non-SCSTs: OLS estimation of mean earnings, and quantile regressions. Correspondingly, we use two decomposition methods: the conventional Blinder-Oaxaca decomposition and Melly's (2006) refinement of the Machado and Mata (2005) decomposition of quantile gaps. We find clear differences in characteristics between SCST-owned and non-SCST owned businesses. The Blinder-Oaxaca decomposition reveals that depending on the specification of explanatory variables, as much as 70 percent of the earnings gap could be attributed to the "unexplained" or the discriminatory component. Quantile regressions reveal that gaps are higher at lower deciles than the higher ones (both raw gaps, as well as after controlling for characteristics), and the decompositions show that the unexplained component is higher at the lower deciles than higher, suggesting that SCST-owned businesses at the lower end of the conditional distribution face greater discrimination, as compared to those at the higher end. Thus, we find strong evidence of a "sticky floor", a phenomenon observed for gender wage gaps in developing countries (incontrast to a "glass ceiling" in developed countries).

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Bibliographic Info

Paper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 236.

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Length: 66 pages
Date of creation: Feb 2014
Date of revision:
Handle: RePEc:cde:cdewps:236

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Keywords: Caste; discrimination; household nonfarm business; earning gaps; quantile regressions; earnings decomposition.;

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  1. George J. Borjas, 1986. "The Self-Employment Experience of Immigrants," Journal of Human Resources, University of Wisconsin Press, vol. 21(4), pages 485-506.
  2. Buchinsky, Moshe, 1994. "Changes in the U.S. Wage Structure 1963-1987: Application of Quantile Regression," Econometrica, Econometric Society, vol. 62(2), pages 405-58, March.
  3. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
  4. Deon Filmer & Lant Pritchett, 2001. "Estimating Wealth Effects Without Expenditure Data—Or Tears: An Application To Educational Enrollments In States Of India," Demography, Springer, vol. 38(1), pages 115-132, February.
  5. Ashish Singh, 2011. "Farm income inequality and the role of caste: new evidence from India," Economics Bulletin, AccessEcon, vol. 31(4), pages 2847-2862.
  6. Melly, Blaise, 2005. "Decomposition of differences in distribution using quantile regression," Labour Economics, Elsevier, vol. 12(4), pages 577-590, August.
  7. George J. Borjas, 1986. "The Self-Employment Experience of Immigrants," NBER Working Papers 1942, National Bureau of Economic Research, Inc.
  8. Allen, W. David, 2000. "Social networks and self-employment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 29(5), pages 487-501.
  9. George J. Borjas & Stephen G. Bronars, 1988. "Consumer Discrimination and Self-Employment," NBER Working Papers 2627, National Bureau of Economic Research, Inc.
  10. Ashwini Deshpande & Smriti Sharma, 2013. "Entrepreneurship or Survival? Caste and Gender of Small Business in India," Working papers 228, Centre for Development Economics, Delhi School of Economics.
  11. José Mata & José A. F. Machado, 2005. "Counterfactual decomposition of changes in wage distributions using quantile regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 445-465.
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