IDEAS home Printed from https://ideas.repec.org/a/tpr/asiaec/v24y2025i3p1-31.html

Why Is Labor Receiving a Declining Share of Income in India? Role of Trade and Market Share Reallocation

Author

Listed:
  • C. Veeramani

    (Centre for Development Studies Thiruvananthapuram, India)

  • Anwesha Basu

    (FLAME University Pune, India)

Abstract

In this paper we conduct an empirical analysis of the drivers of labor share decline in India by combining economy-wide, industry-level, and firm-level evidence across both formal and informal sectors. Atypical patterns of structural transformation—where India largely bypassed labor-intensive industrialization and shifted directly from agriculture to capital- and skill-intensive manufacturing and services—emerge as a central factor. Market share reallocation is identified as the principal driver of labor share decline. Firm-level evidence shows that trade openness—via tariff liberalization, the “China shock,” and global value chain participation—is positively associated with labor share but only partially offsets the effects of domestic structural dynamics.

Suggested Citation

  • C. Veeramani & Anwesha Basu, 2025. "Why Is Labor Receiving a Declining Share of Income in India? Role of Trade and Market Share Reallocation," Asian Economic Papers, MIT Press, vol. 24(3), pages 1-31, Fall.
    • Handle: RePEc:tpr:asiaec:v:24:y:2025:i:3:p:1-31
    DOI: 10.1162/ASEP.a.1
    as

    Download full text from publisher

    File URL: https://doi.org/10.1162/ASEP.a.1
    Download Restriction: no
    File URL: https://libkey.io/10.1162/ASEP.a.1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:asiaec:v:24:y:2025:i:3:p:1-31. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: The MIT Press (email available below). General contact details of provider: https://direct.mit.edu/journals .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.