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The Structure of Wages in India, 1983-1999

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  • Puja Vasudeva Dutta

    ()
    (National Council of Applied Economic Research, New Delhi)

Abstract

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.

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File URL: http://www.sussex.ac.uk/Units/PRU/wps/wp25.pdf
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Bibliographic Info

Paper provided by Poverty Research Unit at Sussex, University of Sussex in its series PRUS Working Papers with number 25.

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Length: 38 pages
Date of creation: Jul 2004
Date of revision:
Handle: RePEc:pru:wpaper:25

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Web page: http://www.sussex.ac.uk/Units/PRU/
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Keywords: wages; returns to education; segmented labour markets; India;

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References

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  1. Ann Harrison & Gordon Hanson, 1999. "Who Gains from Trade Reform? Some Remaining Puzzles," NBER Working Papers 6915, National Bureau of Economic Research, Inc.
  2. Appleton, Simon & Hoddinott, John & Knight, John, 1996. "Primary Education as an Input into Post-primary Education: A Neglected Benefit," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(1), pages 211-19, February.
  3. William T. Dickens & Kevin Lang, 1985. "A Test of Dual Labor Market Theory," NBER Working Papers 1314, National Bureau of Economic Research, Inc.
  4. Andrew Newell & Barry Reilly, 1999. "Rates of Return to Educational Qualifications in the Transitional Economies," Education Economics, Taylor & Francis Journals, vol. 7(1), pages 67-84.
  5. Wood, Adrian, 1997. "Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom," World Bank Economic Review, World Bank Group, vol. 11(1), pages 33-57, January.
  6. Whitney Newey, 1999. "Two Step Series Estimation of Sample Selection Models," Working papers 99-04, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  8. Psacharopoulos, George, 1993. "Returns to investment in education : a global update," Policy Research Working Paper Series 1067, The World Bank.
  9. Geeta Gandhi Kingdon, 1998. "Does the labour market explain lower female schooling in India?," Journal of Development Studies, Taylor & Francis Journals, vol. 35(1), pages 39-65.
  10. Sahn, David E. & Alderman, Harold, 1988. "The effects of human capital on wages, and the determinants of labor supply in a developing country," Journal of Development Economics, Elsevier, vol. 29(2), pages 157-183, September.
  11. Kingdon, Geeta, 1996. "The Quality and Efficiency of Private and Public Education: A Case-Study of Urban India," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(1), pages 57-82, February.
  12. Siphambe, Happy Kufigwa, 2000. "Rates of return to education in Botswana," Economics of Education Review, Elsevier, vol. 19(3), pages 291-300, June.
  13. World Bank, 2002. "Poverty in India : The Challenge of Uttar Pradesh," World Bank Other Operational Studies 13876, The World Bank.
  14. Bennell, Paul, 1996. "Rates of return to education: Does the conventional pattern prevail in sub-Saharan Africa?," World Development, Elsevier, vol. 24(1), pages 183-199, January.
  15. Murphy, Kevin M & Welch, Finis, 1990. "Empirical Age-Earnings Profiles," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 202-29, April.
  16. George Psacharopoulos & Harry Anthony Patrinos, 2004. "Returns to investment in education: a further update," Education Economics, Taylor & Francis Journals, vol. 12(2), pages 111-134.
  17. Behrman, Jere R & Birdsall, Nancy, 1983. "The Quality of Schooling: Quantity Alone is Misleading," American Economic Review, American Economic Association, vol. 73(5), pages 928-46, December.
  18. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  19. Glewwe, P., 1991. "Schooling, skills, and the returns to government investment in education: an exloration using data from Ghana," Papers 76, World Bank - Living Standards Measurement.
  20. Banerjee, Biswajit & Knight, J. B., 1985. "Caste discrimination in the Indian urban labour market," Journal of Development Economics, Elsevier, vol. 17(3), pages 277-307, April.
  21. Jorge Saba Arbache & Andy Dickerson & Francis Green, 2004. "Trade Liberalisation and Wages in Developing Countries," Economic Journal, Royal Economic Society, vol. 114(493), pages F73-F96, 02.
  22. Lee, Lung-Fei, 1983. "Generalized Econometric Models with Selectivity," Econometrica, Econometric Society, vol. 51(2), pages 507-12, March.
  23. Glewwe, Paul, 1996. "The relevance of standard estimates of rates of return to schooling for education policy: A critical assessment," Journal of Development Economics, Elsevier, vol. 51(2), pages 267-290, December.
  24. Geeta Gandhi Kingdon & Jeemol Unni, 2001. "Education and Women's Labour Market Outcomes in India," Education Economics, Taylor & Francis Journals, vol. 9(2), pages 173-195.
  25. Self, Sharmistha & Grabowski, Richard, 2004. "Does education at all levels cause growth? India, a case study," Economics of Education Review, Elsevier, vol. 23(1), pages 47-55, February.
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Cited by:
  1. 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.
  2. Abraham, Vinoj, 2012. "Wages and earnings of marginalized social and religious groups in India: Data sources, scope, limitations and suggestions," MPRA Paper 37799, University Library of Munich, Germany.
  3. Scott Fulford, 2012. "Returns to education in India," Boston College Working Papers in Economics 819, Boston College Department of Economics.

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