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Impact of Trade on Labour Productivity and Wage Inequality in India

Author

Listed:
  • Hashim, Danish
  • Banga, Rashmi

Abstract

Abstract: The paper empirically estimates the impact of trade on labour productivity and wage inequality between skilled (white collar) and unskilled (blue collar) labour in Indian manufacturing. Analysis is undertaken using dynamic panel data estimations (GMM) for 58 manufacturing industries for the period 1998-99 to 2004-05. The results show that export intensity of industries has positively impacted productivity of unskilled labour while import competition has led to higher productivity of both skilled and unskilled labour. However, trade has led to increase in wage inequalities between skilled and unskilled labour implying that it has increased the wages of skilled labour more than the unskilled labour.

Suggested Citation

  • Hashim, Danish & Banga, Rashmi, 2009. "Impact of Trade on Labour Productivity and Wage Inequality in India," MPRA Paper 35200, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:35200
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    File URL: https://mpra.ub.uni-muenchen.de/35200/1/MPRA_paper_35200.pdf
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    References listed on IDEAS

    as
    1. Head, Keith & Ries, John, 2001. "Overseas Investment and Firm Exports," Review of International Economics, Wiley Blackwell, vol. 9(1), pages 108-122, February.
    2. Rashmi Banga, 2007. "Impact of Liberalisation on Wages and Employment in Indian Manufacturing Industries," Working Papers id:989, eSocialSciences.
    3. Francisco Alcalá & Antonio Ciccone, 2004. "Trade and Productivity," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 613-646.
    4. Bernard, Andrew B. & Jensen, J. Bradford & Schott, Peter K., 2006. "Trade costs, firms and productivity," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 917-937, July.
    5. Stephen Nickell & D Nicolitsas, 1994. "Wages," CEP Discussion Papers dp0219, Centre for Economic Performance, LSE.
    6. Durevall, Dick & Munshi, Farzana, 2006. "Trade Liberalization and Wage Inequality: Empirical Evidence from Bangladesh," Working Papers in Economics 205, University of Gothenburg, Department of Economics.
    7. Krishna, Pravin & Mitra, Devashish, 1998. "Trade liberalization, market discipline and productivity growth: new evidence from India," Journal of Development Economics, Elsevier, vol. 56(2), pages 447-462, August.
    8. Rashmi Banga, 2007. "Liberalisation and Wage Inequality In India," Working Papers id:805, eSocialSciences.
    9. Markusen, James R & Venables, Anthony J, 1997. "The Role of Multinational Firms in the Wage-Gap Debate," Review of International Economics, Wiley Blackwell, vol. 5(4), pages 435-451, November.
    10. James McDonald & Harry Bloch, 1999. "The Spillover Effects of Industrial Action on Firm Profitability," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 15(2), pages 183-200, September.
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    Citations

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    Cited by:

    1. Sharma, Chandan & Mishra, Ritesh Kumar, 2015. "International trade and performance of firms: Unraveling export, import and productivity puzzle," The Quarterly Review of Economics and Finance, Elsevier, vol. 57(C), pages 61-74.
    2. Furuta, Manabu, 2016. "Trade Liberalization and Wage Inequality in the Indian Manufacturing Sector," MPRA Paper 73709, University Library of Munich, Germany.

    More about this item

    Keywords

    Trade and Wage Inequality; labour productivity; wage inequality between skilled and unskilled labour; Wage Inequality; Indian manufacturing and labour productivity; Indian manufacturing and wage inequality; Labour productivity of unskilled labour;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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