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Exogenous technological change and wage inequality in rural India: a theoretical note


  • Arindam Banik
  • Pradip K. Bhaumik
  • Sundayo Iyare


Purpose - The purpose of this paper is to develop a theoretical model to explore the economic consequences of an exogenous skill-biased technological change. Design/methodology/approach - The paper develops a theoretical model based on assumptions and conditions that replicate those of a government-sponsored poverty reduction programme in India. Findings - The paper finds that, under certain stated conditions, wage inequality between artisans with improved toolkits and those without is likely to increase, while, under a different set of conditions, this is likely to decrease. Research limitations/implications - Actual wage inequality implications of specific exogenous skill-biased technological changes need to be studied to take the theoretical model further. Practical implications - One major implication is that, when government help is provided by way of an exogenous skill-biased technological change to a fraction of workers, it may have the unintended consequence of increasing wage inequality between the beneficiary and the non-beneficiary workers. In extreme cases, it may even lower the equilibrium wages of the non-beneficiary workers. Originality/value - The paper brings out the critical role of efficiency units of workers with skill-biased technology (artisans with improved toolkits) and those without these in determining the wage inequality between these categories of workers (artisans) based on a theoretical model of the trajectory along which the rural economy moves.

Suggested Citation

  • Arindam Banik & Pradip K. Bhaumik & Sundayo Iyare, 2007. "Exogenous technological change and wage inequality in rural India: a theoretical note," International Journal of Social Economics, Emerald Group Publishing, vol. 34(10), pages 735-740, September.
  • Handle: RePEc:eme:ijsepp:v:34:y:2007:i:10:p:735-740

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    Change management; India; Skills; Labour efficiency;


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