Trade policy and wage inequality: evidence from Indian manufacturing
Purpose - There has been a period of slow but a steady increase in wage inequality in the Indian manufacturing sector since the mid-1980s, which has gone hand-in-hand with an increase in the relative employment of skilled workers across all industries in the same period. The purpose of this paper is to investigate whether the co-movement of relative employment and wages of skilled workers can be attributed to the changes in trade policy that has occurred in the Indian economy since the mid-1980s. Design/methodology/approach - The two dominant theoretical perspectives on why trade reforms lay lead to wage inequality are Heckscher–Ohlin theory and trade-induced skill-biased technological change (SBTC). The paper evaluates the applicability of these theoretical perspectives to the Indian case using disaggregated industry data from Findings - Evidence was found of the validity of both the two dominant theoretical perspectives on wage inequality to explain the co-movement in wage inequality and relative skill intensity in Indian manufacturing, with both variables increasing in the 1990s. Trade-induced technological progress has led to an increase in relative skill intensity and wage inequality within industries. At the same time, the decline in protection that seems to have occurred more in unskilled labour-intensive industries has led to a relative fall in the economy-wide return to unskilled labour relative to skilled labour. Therefore, trade reforms have led to a widening of wage gap between skilled and unskilled workers, and an increase in relative skill intensity in Indian manufacturing. Originality/value - The paper contributes to support of the trade-induced SBTC hypothesis which may provide a consistent explanation of why many countries in the south experienced increases in wage inequality with the onset of trade liberalisation.
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.
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.
Volume (Year): 1 (2008)
Issue (Month): 2 (September)
|Contact details of provider:|| Web page: http://www.emeraldinsight.com|
|Order Information:|| Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK|
Web: http://www.emeraldinsight.com/igdr.htm Email:
When requesting a correction, please mention this item's handle: RePEc:eme:igdrpp:v:1:y:2008:i:2:p:147-171. 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: (Virginia Chapman)
If references are entirely missing, you can add them using this form.