Income Inequality and Caste in India: Evidence from India Human Development Surveys

Abstract

The problem of income inequality has become a defining problem in today’s world yet, the implications of overall income inequality for different social groups remain understudied. The sociological literature on stratification has treated these two important facets of inequality, namely overall income inequality and group income gaps, separately. I study these two problems together in this dissertation by examining overall income inequality and caste and religious groups in the context of Indian society. Using the nationally representative data from India Human Development Surveys, I first examine in detail, overall income and consumption changes and inequality from 2004-05 to 2011-12. Then, I look at changes in income and consumption for different caste and religious groups and study inequality changes between these groups. In the end, I evaluate the role played by educational expansion and returns to education in explaining changes in overall income inequality as well as group income gaps using OLS and Quintile regression models.I find that income inequality based on both income as well as consumption measures has increased in India between 2004-05 and 2011-12. But contrary to the global pattern of increasing income inequality, income inequality in India was driven not just because of high growth for households at the top, but more so due to low growth of incomes for households at the bottom of the income distribution. Despite this rise in overall income inequality, income gaps and inequality between the forward caste and disadvantaged caste groups are getting closed. Though caste disadvantage is operational at all parts of income distribution, it becomes less oppressive over time. I find that while education helps explain the declining between-caste income inequality, it does not satisfactorily answer why overall income inequality is growing. I also find that socially disadvantaged groups as well as low educational households who are concentrated disproportionately at lower incomes did better in terms of their income growth over time. Yet, the low-income households as a whole somehow did not grow much over time. These opposite trends among lower income households, is a puzzling result.