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Relative Prices, Trade, Technology and Wage Inequality: Evidence from India

Author

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  • Archana Srivastava
  • Somesh Kumar Mathur

Abstract

This article examines the link between relative export, import and domestic goods’ prices and relative wages over the years by empirically testing the Stolper–Samuelson theorem for India. It also examines the role of other factors such as manufacturing trade, liberalization phase, inflation, foreign and domestic technology, etc. on rising wage inequality in the manufacturing sector in India.  The results seem to prove the validity of Stolper–Samuelson theorem. The results also throw some light on Rybczynski theorem, which shows the relationship between output and endowment and factor price insensitivity elasticity, and the link between factor endowments and factor prices. The empirical testing is done using estimates of the translog production function and translog cost function along with the share equations. The elasticity of substitution between factors of production has been worked out using Allen’s and Morishima’s formulae, which in turn use estimates of the translog cost function.

Suggested Citation

  • Archana Srivastava & Somesh Kumar Mathur, 2013. "Relative Prices, Trade, Technology and Wage Inequality: Evidence from India," Foreign Trade Review, , vol. 48(3), pages 359-381, August.
    • Handle: RePEc:sae:fortra:v:48:y:2013:i:3:p:359-381
    DOI: 10.1177/0015732513496618
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    References listed on IDEAS

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    More about this item

    Keywords

    Trade liberalization; wage inequality; translog production function; Stolper–Samuelson elasticity; Rybczynski elasticity; factor price insensitivity elasticity; translog cost function; Allen’s and Morishima’s formulae for elasticity of substitution;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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