Manufacturing Dynamism and the Welfare of Workers and Households in India

Type Journal Article - Asian Development Bank
Title Manufacturing Dynamism and the Welfare of Workers and Households in India
Author(s)
Publication (Day/Month/Year) 2012
URL http://www.rbnz.govt.nz/research/workshops/feb2012/4682209.pdf
Abstract
This paper brings new evidence to the debate on whether the manufacturing sector can contribute to improvements in labor market outcomes, household welfare and poverty reduction. It combines Indian firm establishment, labor force and household survey data from 1994-2005 to analyze changes in outcomes at the district level. The results indicate that increasing the employment in the manufacturing sector is significantly important for raising wages, reducing inequality, and decreasing poverty. Less substantial evidence, however, is found on the characteristics of a dynamic manufacturing sector that may help to further improve the outcomes within districts. Increasing the share of larger firms may reduce wage inequality and having a more even distribution of gross value added over a larger number of manufacturing industries may increase weekly earnings of workers. The evidence is less clear on what aspects of the manufacturing sector can improve household welfare outcomes which better captures the wider economy including the informal sector.

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