India’s Increasing Skill Premium: Role of Demand and Supply
AbstractThe tertiary (college)-secondary (high school) wage premium has been increasing in India over the past decade, but this increase differs across age groups. The increase in wage premium has been driven mostly by younger age groups, while older age groups have not experienced any significant increase. This paper uses the demand and supply model with imperfect substitution across age groups developed by Card and Lemieux (2001) to explain the uneven increase in the wage premium across age groups in India. The findings of this paper are that the increase in the wage premium has come mostly from demand shifts in favor of workers with a tertiary education. More importantly, the demand shifts occurred in both the 1980s and 1990s. The relative supply has played an important role not only determining the extent of increase in wage premium, but also its timing. The increase in relative supply of tertiary workers during 1983-1993 negated the demand shift; as a result, the wage premium did not increase much. But during 1993-1999, the growth rate of the relative supply of tertiary workers decelerated, while relative supply became virtually stagnant during 1999-2004. Both these periods saw an increase in the wage premium as the countervailing supply shift was weak.
Download InfoIf 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.
Bibliographic InfoPaper provided by Southern Methodist University, Department of Economics in its series Departmental Working Papers with number 0710.
Length: 32 pages
Date of creation: Oct 2007
Date of revision:
Contact details of provider:
Postal: Department of Economics, P.O. Box 750496, Southern Methodist University, Dallas, TX 75275-0496
Web page: http://www.smu.edu/economics
India; wage premium; tertiary (college); secondary (high school);
Other versions of this item:
- Azam, Mehtabul, 2009. "India's Increasing Skill Premium: Role of Demand and Supply," IZA Discussion Papers 3968, Institute for the Study of Labor (IZA).
- J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-03 (All new papers)
- NEP-CWA-2007-11-03 (Central & Western Asia)
- NEP-HRM-2007-11-03 (Human Capital & Human Resource Management)
- NEP-LAB-2007-11-03 (Labour Economics)
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.:
- 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.
- Angrist, Joshua D, 1996.
"Short-Run Demand for Palestinian Labor,"
Journal of Labor Economics,
University of Chicago Press, vol. 14(3), pages 425-53, July.
- Gaurav Datt & Martin Ravallion, 2002.
"Is India's Economic Growth Leaving the Poor Behind?,"
Journal of Economic Perspectives,
American Economic Association, vol. 16(3), pages 89-108, Summer.
- Datt, Gaurav & Ravallion, Martin, 2002. "Is India's economic growth leaving the poor behind?," Policy Research Working Paper Series 2846, The World Bank.
- Angus Deaton & Jean Dreze, 2002.
"Poverty and Inequality in India: A Re-Examination,"
184, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
- David Card & Thomas Lemieux, 2000.
"Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis,"
NBER Working Papers
7655, National Bureau of Economic Research, Inc.
- David Card & Thomas Lemieux, 2001. "Can Falling Supply Explain The Rising Return To College For Younger Men? A Cohort-Based Analysis," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 705-746, May.
- Marco Manacorda & Carolina Sanchez-Paramo & Norbert Schady, 2005.
"Changes in Returns to Education in Latin America: the Role of Demand and Supply of Skills,"
CEP Discussion Papers
dp0712, Centre for Economic Performance, LSE.
- Marco Manacorda & Carolina Sánchez-Páramo & Norbert Schady, 2010. "Changes in Returns to Education in Latin America: The Role of Demand and Supply of Skills," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 63(2), pages 307-326, January.
- Utsav Kumar & Prachi Mishra, 2008.
"Trade Liberalization and Wage Inequality: Evidence from India,"
Review of Development Economics,
Wiley Blackwell, vol. 12(2), pages 291-311, 05.
- Prachi Mishra & Utsav Kumar, 2005. "Trade Liberalization and Wage Inequality: Evidence from India," IMF Working Papers 05/20, International Monetary Fund.
- Daron Acemoglu, 2000.
"Technical Change, Inequality, and the Labor Market,"
NBER Working Papers
7800, National Bureau of Economic Research, Inc.
- Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
- 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.
- Kevin M. Murphy & W. Craig Riddell & Paul M. Romer, 1998. "Wages, Skills, and Technology in the United States and Canada," NBER Working Papers 6638, National Bureau of Economic Research, Inc.
- Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
- David Card & John E. DiNardo, 2002.
"Skill Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles,"
NBER Working Papers
8769, National Bureau of Economic Research, Inc.
- David Card & John E. DiNardo, 2002. "Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 733-783, October.
- Pavcnik, Nina, 2003.
"What explains skill upgrading in less developed countries?,"
Journal of Development Economics,
Elsevier, vol. 71(2), pages 311-328, August.
- Nina Pavcnik, 2000. "What Explains Skill Upgrading in Less Developed Countries?," NBER Working Papers 7846, National Bureau of Economic Research, Inc.
- Puja Vasudeva Dutta, 2005. "Accounting for Wage Inequality in India," PRUS Working Papers 29, Poverty Research Unit at Sussex, University of Sussex.
- Kaushik Basu & Vidya Atal & John Gray & Travis Lee, 2009.
"Literacy Traps: Society-wide Education and Individual Skill Premia,"
- Vidya Atal & Kaushik Basu & John Gray & Travis Lee, 2010. "Literacy traps: Society-wide education and individual skill premia," International Journal of Economic Theory, The International Society for Economic Theory, vol. 6(1), pages 137-148.
- Atal, Vidya & Basu, Kaushik & Gray, John & Lee, Travis, 2009. "Literacy Traps: Society-Wide Education and Individual Skill Premia," Working Papers 09-05, Cornell University, Center for Analytic Economics.
- Atal, Vidya & Basu, Kaushik & Gray, John & Lee, Travis, 2009. "Literacy Traps: Society-wide Education and Individual Skill Premia," IZA Discussion Papers 4047, Institute for the Study of Labor (IZA).
- Beretta, Silvio & Targetti Lenti, Renata, 2011. "“India in the Outsourcing/Offshoring Process: A Western Perspective” - L’India nel processo di outsourcing/offshoring: un punto di vista occidentale," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 64(3), pages 269-296.
- Beladi, Hamid & Marjit, Sugata & Weiher, Kenneth, 2011. "An analysis of the demand for skill in a growing economy," Economic Modelling, Elsevier, vol. 28(4), pages 1471-1474, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bo Chen).
If references are entirely missing, you can add them using this form.