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Skill sorting, inter-industry skill wage premium, and production chains: evidence from India 1999-2000

Listed author(s):
  • Asuyama, Yoko
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    This paper proposes a mechanism that links industry’s technological characteristics (i.e. quality of non-labor inputs, which is proxied by the length of industry production chains), industry-specific skill wage premium, and skill sorting across industries. It is hypothesized that high-skilled workers are sorted into industries where they can receive a higher skill wage premium, by working with better quality non-labor input. The quality of non-labor inputs is assumed to be worse in industries with longer production chains due to the increased involvement of low-skilled labor and poor infrastructure over the sequential production. By examining Indian wage and employment data for 1999-2000, empirical evidence to support this mechanism can be obtained: First, the skill wage premium is lower [higher] in industries with longer [shorter] production chains. Second, the skill wage premium is lower [higher] in industries with a higher [lower] proportion of low-skilled workers producing inputs outside their own industry. Third, the proportion of high-skilled workers is larger in industries with shorter production chains and lower ratio of low-skilled labor involved, i.e., a skill sorting trend can be observed.

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    File URL: http://ir.ide.go.jp/dspace/bitstream/2344/944/1/ARRIDE_Discussion_No.278_asuyama.pdf
    File Function: First version, 2011
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    Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 278.

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    Date of creation: Feb 2011
    Publication status: Published in IDE Discussion Paper. No. 278. 2011. 2
    Handle: RePEc:jet:dpaper:dpaper278
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    1. Gene M. Grossman, 2004. "The Distribution of Talent and the Pattern and Consequences of International Trade," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 209-239, February.
    2. Goldberg, Pinelopi Koujianou & Pavcnik, Nina, 2003. "Trade, Wages and the Political Economy of Trade Protection: Evidence from the Colombian Trade Reforms," CEPR Discussion Papers 3877, C.E.P.R. Discussion Papers.
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    4. Kijima, Yoko, 2006. "Why did wage inequality increase? Evidence from urban India 1983-99," Journal of Development Economics, Elsevier, vol. 81(1), pages 97-117, October.
    5. Nannan Lundin & Lihong Yun, 2009. "International Trade and Inter-Industry Wage Structure in Swedish Manufacturing: Evidence from Matched Employer-Employee Data," Review of International Economics, Wiley Blackwell, vol. 17(1), pages 87-102, 02.
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    7. William T. Dickens, 1986. "Wages, Employment and the Threat of Collective Action by Workers," NBER Working Papers 1856, National Bureau of Economic Research, Inc.
    8. Goux, Dominique & Maurin, Eric, 1999. "Persistence of Interindustry Wage Differentials: A Reexamination Using Matched Worker-Firm Panel Data," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 492-533, July.
    9. Puja Vasudeva Dutta, 2007. "Trade Protection and Industry Wages in India," ILR Review, Cornell University, ILR School, vol. 60(2), pages 268-286, January.
    10. Michael Kremer, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 551-575.
    11. Puja Vasudeva Dutta, 2004. "Trade Protection and Inter-industry Wages in India," PRUS Working Papers 27, Poverty Research Unit at Sussex, University of Sussex.
    12. Thomas Sampson, 2011. "Assignment Reversals: Trade, Skill Allocation and Wage Inequality," CEP Discussion Papers dp1105, Centre for Economic Performance, LSE.
    13. Nina Pavcnik & Andreas Blom & Pinelopi Goldberg & Norbert Schady, 2004. "Trade Liberalization and Industry Wage Structure: Evidence from Brazil," World Bank Economic Review, World Bank Group, vol. 18(3), pages 319-344.
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