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Liberalisation and Wage Inequality In India

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  • Rashmi Banga

Abstract

This paper is a pioneering attempt in estimating the impact of three major components of liberalisation on labour productivity and wage inequality in the Indian manufacturing sector, namely FDI, trade and technological progress. The study has shown that these components have led to an improvement in labour productivity in the post- reforms period. However, they have a differential impact on the wages of skilled and unskilled workers. Wage inequality is found to have increased overtime and this has been caused mainly by higher FDI and skill-biased technological progress. An important policy implication is that `to maximise the benefits of FDI, it is important to channelise it towards export-oriented industries, which use larger number of low-skilled workers`. The paper also emphasises on the importance of research and development (R&D) to make technological progress in less skill-biased Indian industries.

Suggested Citation

  • Rashmi Banga, 2007. "Liberalisation and Wage Inequality In India," Working Papers id:805, eSocialSciences.
  • Handle: RePEc:ess:wpaper:id:805
    Note: Institutional Papers
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    References listed on IDEAS

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    Cited by:

    1. Gupta Manash Ranjan & Dutta Priya Brata, 2014. "Skilled-Unskilled Wage Inequality, Growth of Skilled Labour and Development Policies," Journal of Globalization and Development, De Gruyter, vol. 5(1), pages 1-26, June.
    2. Eckhard Siggel & Pradeep Agrawal, 2009. "The Impact Of Economic Reforms On Indian Manufacturers : Evidence From A Small Sample Survey," Development Economics Working Papers 22930, East Asian Bureau of Economic Research.
    3. Alokesh Baura & Priyanta Ghosh, 2015. "On Wage Inequality, Trade and Technology: Theory and Empirics," Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi Discussion Papers 15-09, Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi, India.
    4. Pan, Lijun & Zhou, Yu, 2013. "International factor mobility, environmental pollution and skilled–unskilled wage inequality in developing countries," Economic Modelling, Elsevier, vol. 33(C), pages 826-831.
    5. Javed Iqbal & Misbah Nosheen & Syed Nawab Haider Naqvi, 2015. "Trade Shocks and Labour Adjustment: Evidence from Pakistan’s Manufacturing Industries," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 54(3), pages 197-214.
    6. Pi, Jiancai & Zhou, Yu, 2013. "Institutional quality and skilled–unskilled wage inequality," Economic Modelling, Elsevier, vol. 35(C), pages 356-363.
    7. Sahu, Pritish Kumar, 2010. "FDI, wage inequality and employment in emerging economies: recent evidence from Indian manufacturing," MPRA Paper 35149, University Library of Munich, Germany.
    8. Li, Xiaochun & Zhou, Yu, 2013. "An economic analysis of remittance of unskilled migration on skilled–unskilled wage inequality in labor host region," Economic Modelling, Elsevier, vol. 33(C), pages 428-432.
    9. Hashim, Danish & Banga, Rashmi, 2009. "Impact of Trade on Labour Productivity and Wage Inequality in India," MPRA Paper 35200, University Library of Munich, Germany.

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    Keywords

    Manufacturing sector; Skills;

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