Caste Dominance and Economic Performance in Rural India

Using household panel data for rural India covering 1993–94 and 2004–5, we test whether scheduled castes (SCs) and other minority groups perform better or worse in terms of income when resident in villages dominated by (i) upper castes or (ii) their own group. Theoretically, upper-caste dominance comprises a potential “proximity gain” and offsetting group-specific “oppression” effects. For SCs and other backward classes (OBCs), initial proximity gains dominate negative oppression effects because upper-caste-dominated villages are located in more productive areas: once agroecology is controlled for, proximity and oppression effects cancel each other out. Although the effects are theoretically ambiguous, we find large, positive own-dominance or enclave effects for upper castes, OBCs, and especially SCs. These village regime effects are restricted to the Hindu social groups. Combining pathway and income source analysis, we close in on the mechanisms underpinning identity-based income disparities; while education matters, landownership accounts for most enclave effects. A strong postreform SC own-village advantage turns out to have agricultural rather than nonfarm or business origins. We also find upper-caste dominance to inhibit the educational progress of other social groups, along with negative enclave effects on the educational progress of Muslim women and scheduled tribe men.