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Wage Inequality in Indian Manufacturing - Is it Trade, Technology or Labour Regulations?


  • K.V. Ramaswamy

    (Indira Gandhi Institute of Development Research)


This paper investigates the question of wage inequality in Indian manufacturing in the years of trade and investment liberalization. The objective is to test the hypothesis of skill biased technological change (SBTC) due to capital-skill complementarity and the impact of labour regulations on wage inequality between skilled and unskilled labour. The skill-wage bill share equation is estimated for a panel of 46 three-digit industries spanning the period 1981-2004 followed by 113 four-digit industries panel covering the period 1993 to 2004.The econometric results suggest the positive contribution of change in output (scale effect), capital-output ratio and contract-worker intensity to wage inequality in Indian manufacturing.

Suggested Citation

  • K.V. Ramaswamy, 2008. "Wage Inequality in Indian Manufacturing - Is it Trade, Technology or Labour Regulations?," Labor Economics Working Papers 22361, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:laborw:22361

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    References listed on IDEAS

    1. Haggblade, Steven & Hazell, Peter & Brown, James, 1989. "Farm-nonfarm linkages in rural sub-Saharan Africa," World Development, Elsevier, vol. 17(8), pages 1173-1201, August.
    2. Hazell, P. B. R. & Roell, Ailsa, 1983. "Rural growth linkages: household expenditure patterns in Malaysia and Nigeria," Research reports 41, International Food Policy Research Institute (IFPRI).
    3. Berdegue, Julio A. & Ramirez, Eduardo & Reardon, Thomas & Escobar, German, 2001. "Rural Nonfarm Employment and Incomes in Chile," World Development, Elsevier, vol. 29(3), pages 411-425, March.
    4. Reardon, Thomas & Berdegue, Julio & Escobar, German, 2001. "Rural Nonfarm Employment and Incomes in Latin America: Overview and Policy Implications," World Development, Elsevier, vol. 29(3), pages 395-409, March.
    5. Deininger, Klaus & Olinto, Pedro, 2001. "Rural Nonfarm Employment and Income Diversification in Colombia," World Development, Elsevier, vol. 29(3), pages 455-465, March.
    6. Ferreira, Francisco H. G. & Lanjouw, Peter, 2001. "Rural Nonfarm Activities and Poverty in the Brazilian Northeast," World Development, Elsevier, vol. 29(3), pages 509-528, March.
    7. Corral, Leonardo & Reardon, Thomas, 2001. "Rural Nonfarm Incomes in Nicaragua," World Development, Elsevier, vol. 29(3), pages 427-442, March.
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    Cited by:

    1. Ashok Kotwal & Bharat Ramaswami & Wilima Wadhwa, 2011. "Economic Liberalization and Indian Economic Growth: What's the Evidence?," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 1152-1199, December.
    2. Adriana Peluffo, 2015. "Foreign Direct Investment, Productivity, Demand for Skilled Labour and Wage Inequality: An Analysis of Uruguay," The World Economy, Wiley Blackwell, vol. 38(6), pages 962-983, June.
    3. Chatterji, Monojit & Choudhury, Homagni, 2010. "The Changing Inter-Industry Wage Structure of the Organised Manufacturing Sector in India, 1973-74 to 2003-04," SIRE Discussion Papers 2010-89, Scottish Institute for Research in Economics (SIRE).
    4. Vinoj Abraham, 2010. "The Effect of Information Technology on Wage Inequality: Evidence from Indian Manufacturing Sector," Working Papers id:3180, eSocialSciences.
    5. repec:oup:indcch:v:26:y:2017:i:4:p:555-570. is not listed on IDEAS
    6. Ranis, Gustav, 2012. "Labor Surplus Revisited," Working Papers 107, Yale University, Department of Economics.
    7. Goldar, Bishwanath. & Sadhukhan, Amit., 2015. "Employment and wages in Indian manufacturing : post-reform performance," ILO Working Papers 994881323402676, International Labour Organization.
    8. repec:ilo:ilowps:488132 is not listed on IDEAS
    9. Gustav Ranis, 2012. "Labor Surplus Revisited," Working Papers 1016, Economic Growth Center, Yale University.

    More about this item


    wages inequality; skill technological change labour manufacturing;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development


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