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Citation Information

Type Working Paper
Title Rising wage inequality in India: a translog cost function analysis
Author(s)
Publication (Day/Month/Year) 2011
URL http://www.xiijornadasecoint.uji.es/programas/B2_1.pdf
Abstract
The paper attempts to investigate the various determinants of rising wage inequality in India since
1980s. A translog cost function along with the share equations is used to evaluate the impact of
various factors such as trade, technology, liberalization phase, efficiency (technical, allocative and
cost) and inflation on rising wage inequality between the skilled and unskilled labour in the
manufacturing sector of India. Seemingly unrelated regressions (SUR) procedure by Zellner is
used for the estimation purpose. Annual Survey of Industries data at the two digit level from the
year 1973-74 to 2007-08, has been used for the study. The findings reveal that trade and
technology both tend to increase the wage inequality. However, when trade interacts with technical
efficiency, it tends to reduce wage inequality while technology when interacts with efficiency
tends to increase wage inequality. Further, elasticity results reveal that capital, skilled labour,
unskilled labour etc have turned out to be, substitutes since 1989, although few of them were
complementary before the liberalisation phase.

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