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

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  • Asuyama, Yoko

Abstract

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.

Suggested Citation

  • Asuyama, Yoko, 2011. "Skill sorting, inter-industry skill wage premium, and production chains: evidence from India 1999-2000," IDE Discussion Papers 278, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper278
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    India; Labor market; Wages; Manufacturing industries; Employment; Labor conditions; Industry wage; Production chains; Sequential production; Skill wage premium; Skill sorting;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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