Does caste matter for wages in the Indian labor market?

Type Report
Title Does caste matter for wages in the Indian labor market?
Author(s)
Publication (Day/Month/Year) 2007
Publisher The World Bank
City Washington, DC
Country/State USA
URL http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.190.3708&rep=rep1&type=pdf
Abstract
This paper explores whether pay gaps on the basis of caste are still evident in the Indian labor market using data from the most recent round of the nationally representative National Sample Survey. Caste in India is the primary source of stratification. The hypothesis is that the hierarchical nature of the caste system and the strong association of ritual purity with different occupations translate into poorer labor market outcomes, including occupational segregation and wage discrimination. Separate wage equations, corrected for selection bias, are estimated for different social groups (scheduled castes, other backward castes and general castes) in regular and casual wage employment. Conventional index number techniques are used to decompose the caste pay gap into ‘endowment’ and ‘treatment’ components. The empirical evidence in this paper suggests that caste is still a determining factor in how individuals are remunerated in the wage labor market. Amongst regular workers the extent of the wage gap is substantial at about 0.37 log points, of which between a third is attributable to unequal treatment of scheduled caste workers relative to general caste workers, depending on whether selection into regular wage employment is taken into account. The wage gap among casual workers, as expected, is very low and almost entirely accounted for by differences in characteristics.

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