Changes in the Wage Gap of Gender and Caste Groups in India
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We explore the changes in the wage gap of caste and gender groups in India. Traditional Hindu society divided people into social classes based on the caste system. The lowest of the castes have traditionally been economically disadvantaged. Women in India have typically been restricted to the household and their participation in the formal labor market has begun expanding only recently. We explore the changes that these two groups have experienced over the years using a nationally representative dataset. In the second chapter we decompose the wage gaps of these groups into explained and unexplained components based on the Blinder-Oaxaca (1973) decomposition technique. Our contribution to the literature here is the extension of the analysis of discrimination to a society with a clearly established social hierarchy. We find that the gross wage gap has reduced over this period, and the extent of the gap attributable to discrimination has decreased over time. We further decompose the wage gap into components attributable to wage differences and occupational differences based on Brown et al. (1980). We find that the wage discrimination component has decreased over time and the job discrimination component is statistically insignificant. In the third chapter we investigate whether there have been beneficial wage gains for women and lower castes because of increased competition following liberalization of trade in India. Based on Becker's model of taste-based employer discrimination, it is expected that as an economy becomes more competitive, employer discrimination should decline. The trade liberalization reforms that began in 1991 in India increased competition by lowering protection in certain manufacturing industries. Firms who could indulge a taste for discrimination when trade protection allowed supernormal profits may not have been able to continue to do so as competition eliminated such profits. Using individual-level data and tariff data from pre- and post-reform periods, we find that wage differences reduced for female workers relative to male workers in the more open manufacturing sector industries. However, there is no significant effect on the wage differential between low and high caste workers.