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Disadvantage and discrimination in self-employment: caste gaps in earnings in Indian small businesses

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  • Ashwini Deshpande

  • Smriti Sharma

Abstract

Using the 2004–2005 India Human Development Survey data, we estimate and decompose the earnings of household businesses owned by historically marginalized social groups known as Scheduled Castes and Tribes (SCSTs) and non-SCSTs across the earnings distribution. We find clear differences in characteristics between the two types of businesses with the former faring significantly worse. The mean decomposition reveals that as much as 55 % of the caste earnings gap could be attributed to the unexplained component. Quantile regressions suggest that gaps are higher at lower deciles, providing some evidence of a sticky floor. Finally, quantile decompositions reveal that the unexplained component is greater at the lower and middle deciles than higher, suggesting that SCST-owned businesses at the lower and middle end of the conditional earnings distribution face greater discrimination. Copyright Springer Science+Business Media New York 2016

Suggested Citation

  • Ashwini Deshpande & Smriti Sharma, 2016. "Disadvantage and discrimination in self-employment: caste gaps in earnings in Indian small businesses," Small Business Economics, Springer, vol. 46(2), pages 325-346, February.
    • Handle: RePEc:kap:sbusec:v:46:y:2016:i:2:p:325-346
    DOI: 10.1007/s11187-015-9687-4
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    Cited by:

    1. Utteeyo Dasgupta & Subha Mani & Smriti Sharma & Saurabh Singhal, 2016. "Caste differences in behaviour and personality: Evidence from India," WIDER Working Paper Series wp-2016-60, World Institute for Development Economic Research (UNU-WIDER).
    2. Ritu Dewan, 2024. "Towards Demystifying Self-Employment in India: Delineation, Dimensionality, Differentia," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 67(2), pages 285-315, June.
    3. Deepti Goel & Ashwini Deshpande, 2020. "Social identity and perceived income adequacy," Review of Development Economics, Wiley Blackwell, vol. 24(2), pages 339-361, May.
    4. Wei Xiao & Mingqin Wu, 2021. "Life-cycle factors and entrepreneurship: evidence from rural China," Small Business Economics, Springer, vol. 57(4), pages 2017-2040, December.
    5. Roychowdhury, Punarjit, 2024. "Social Identity and Depression Among the Elderly: Evidence from India," GLO Discussion Paper Series 1466, Global Labor Organization (GLO).
    6. Tewathia, Nidhi & Kamath, Anant & Ilavarasan, P. Vigneswara, 2020. "Social inequalities, fundamental inequities, and recurring of the digital divide: Insights from India," Technology in Society, Elsevier, vol. 61(C).
    7. Tesfaye T. Lemma & Tendai Gwatidzo & Mthokozisi Mlilo, 2023. "Gender differences in business performance: evidence from Kenya and South Africa," Small Business Economics, Springer, vol. 60(2), pages 591-614, February.
    8. Pallavi Gupta & Satyanarayan Kothe, 2021. "Interpreting the Caste-based Earning Gaps in the Indian Labour Market: Theil and Oaxaca Decomposition Analysis," Papers 2110.06822, arXiv.org.
    9. Utteeyo Dasgupta & Subha Mani & Smriti Sharma & Saurabh Singhal, 2023. "Social Identity, Behavior, and Personality: Evidence from India," Journal of Development Studies, Taylor & Francis Journals, vol. 59(4), pages 472-489, April.
    10. Cummins, Joseph & Guo, Jingyan & Agarwal, Neha & Aiyar, Anaka & Jain, Vaishali & Bergmann, Andrew, 2024. "Caste Differences in Child Growth: Disentangling Endowment and Investment Effects," World Development, Elsevier, vol. 179(C).
    11. Subha Mani & Saurabh Singhal & Smriti Sharma & Utteeyo Dasgupta, 2016. "Caste differences in behaviour and personality: Evidence from India," WIDER Working Paper Series 060, World Institute for Development Economic Research (UNU-WIDER).
    12. Neog Bhaskar Jyoti & Sahoo Bimal Kishore, 2020. "Intragenerational labor mobility in the Indian labor market," IZA Journal of Development and Migration, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 11(1), pages 1-30, January.
    13. Mosse, David, 2018. "Caste and development: Contemporary perspectives on a structure of discrimination and advantage," World Development, Elsevier, vol. 110(C), pages 422-436.
    14. Bhabesh Hazarika, 2020. "Gender income gap in rural informal micro-enterprises: an unconditional quantile decomposition approach in the handloom industry," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 10(3), pages 441-473, September.
    15. Ira N. Gang & Rajesh Raj Natarajan & Kunal Sen & Myeong-Su Yun, 2021. "The gender productivity gap: Evidence from the Indian informal sector," WIDER Working Paper Series wp-2021-183, World Institute for Development Economic Research (UNU-WIDER).
    16. Hari Bapuji & Snehanjali Chrispal, 2020. "Understanding Economic Inequality Through the Lens of Caste," Journal of Business Ethics, Springer, vol. 162(3), pages 533-551, March.
    17. Goel, Deepti & Deshpande, Ashwini, 2016. "Identity, Perceptions and Institutions: Caste Differences in Earnings from Self-Employment in India," IZA Discussion Papers 10198, Institute of Labor Economics (IZA).
    18. Hazarika, Bhabesh, 2017. "Decomposition of Gender Income Gap in Rural Informal Micro-enterprises: An Unconditional Quantile Approach in the Handloom Industry," Working Papers 17/216, National Institute of Public Finance and Policy.
    19. Rajesh Raj S. N. & Subash Sasidharan, 2018. "Does the Caste of the Firm Owner Play a Role in Access to Finance for Small Enterprises? Evidence from India," The Developing Economies, Institute of Developing Economies, vol. 56(4), pages 267-296, December.
    20. Basu,Kaushik, 2015. "Discrimination as a coordination device : markets and the emergence of identity," Policy Research Working Paper Series 7490, The World Bank.
    21. Utteeyo Dasgupta & Subha Mani & Smriti Sharma & Saurabh Singhal, 2020. "Social Identity, Behavior, and Personality," Working Papers 308280016, Lancaster University Management School, Economics Department.

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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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