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Trade Protection and Inter-Industry Wages in India

  • Puja Vasudeva Dutta

This paper examines the link between trade protection and industry wage premia in India using a unique dataset combining employment survey data with industry-level data for various years between 1983 and 2000. The author finds that India's trade reforms were not distributionally neutral. The impact of protection on inter-industry wage premia was positive and statistically significant, though modest in magnitude: workers employed in industries with high tariffs received higher wages than apparently identical workers in low-tariff industries. Because industries with high initial levels of protection were also those with the largest tariff reductions during this period and had the highest share of unskilled workers, the positive tariff-wage effect implies that the trade reforms likely increased wage inequality as the relative wages of the predominantly unskilled workers in these manufacturing industries fell.

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Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

Volume (Year): 60 (2007)
Issue (Month): 2 (January)
Pages: 268-286

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Handle: RePEc:ilr:articl:v:60:y:2007:i:2:p:268-286
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