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Decomposition Analysis of Earnings Inequality in Rural India: 2004-2012

Author

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  • Khanna, Shantanu

    () (University of Delhi)

  • Goel, Deepti

    () (Delhi School of Economics)

  • Morissette, René

    (Statistics Canada)

Abstract

We analyze the changes in earnings of paid workers (wage earners) in rural India from 2004/05 to 2011/12. Real earnings increased at all percentiles, and the percentage increase was larger at the lower end. Consequently, earnings inequality declined. Recentered Influence Function decompositions show that throughout the earnings distribution, except at the very top, both changes in 'worker characteristics' and in 'returns to these characteristics' increased earnings, with the latter having played a bigger role. Decompositions of inequality measures reveal that although the change in characteristics had an inequality increasing effect, chiefly attributable to increased education levels, inequality declined because workers at lower quantiles experienced greater improvements in returns to their characteristics than those at the top.

Suggested Citation

  • Khanna, Shantanu & Goel, Deepti & Morissette, René, 2016. "Decomposition Analysis of Earnings Inequality in Rural India: 2004-2012," IZA Discussion Papers 9974, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp9974
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    Keywords

    earnings; inequality; earnings distribution; rural India;

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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