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

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  • Khanna, Shantanu

    (Northeastern University)

  • Goel, Deepti

    (Pitzer College)

  • 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 of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp9974
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    1. Maria Monica Wihardja & Abror Tegar Pradana, 2024. "Examining the drivers of changes in mean earnings and earnings inequality in Indonesia," Asian Economic Journal, East Asian Economic Association, vol. 38(2), pages 232-255, June.
    2. Aswini Kumar Mishra & Vedant Bhardwaj, 2021. "Wealth distribution and accounting for changes in wealth inequality: empirical evidence from India, 1991–2012," Economic Change and Restructuring, Springer, vol. 54(2), pages 585-620, May.
    3. Kundu, Amit & Das, Sangita, 2018. "Gender Wage Gap in The Agricultural Labor Market of India: An Empirical Analysis," MPRA Paper 95487, University Library of Munich, Germany, revised 10 Feb 2019.
    4. Landmesser Joanna Małgorzata, 2018. "The Use of Hazard Models for the Analysis of Income Inequalities in Poland," Folia Oeconomica Stetinensia, Sciendo, vol. 18(1), pages 144-156, June.
    5. Amit KUNDU & Sangita DAS, 2019. "Gender wage gap in the agricultural labor market of India: An empirical analysis," Journal of Economics and Political Economy, EconSciences Journals, vol. 6(2), pages 122-142, June.

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    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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