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Decomposing Skill Based Wage Inequality in India: An Application of Theil Index

Author

Listed:
  • Sonu Madan

    (Indira Gandhi University)

  • Manisha Yadav

    (Indira Gandhi University)

Abstract

Wage inequality is one of the most prominent topics of discussion across the world. The study is an attempt to estimate wage inequality in-between and within various skill-based occupational groups in India. For the purpose, Theil index, one of the most important measures in generalised entropy family, has been utilised on the unit-level data of Periodic Labour Force Survey, 2017–18 (PLFS) pertaining to 94,460 workers employed across skill-categorised broad occupational groups. Wage inequality has observed to be highest in occupational groups requiring highly skilled workers (skill level 4), and the same is witnessed lowest among workers in occupations requiring low level of skill (skill level 1). The study found occupational diversity, diverse nature of work assignment in accordance with cognitive ability of workers the main reasons behind increasing wage inequalities.

Suggested Citation

  • Sonu Madan & Manisha Yadav, 2022. "Decomposing Skill Based Wage Inequality in India: An Application of Theil Index," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 65(4), pages 967-979, December.
    • Handle: RePEc:spr:ijlaec:v:65:y:2022:i:4:d:10.1007_s41027-022-00405-6
    DOI: 10.1007/s41027-022-00405-6
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