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Wages Over the Course of Structural Transformation: Evidence from India

Author

Listed:
  • Rana Hasan

    (Director, Economic Research and Regional Cooperation Department, Asian Development Bank, Manila, Philippines.)

  • Rhea Molato

    (Economics and Statistics Analyst, Economic Research and Regional Cooperation Department, Asian Development Bank, Manila, Philippines.)

Abstract

This paper uses labor force survey data from India for 2000 and 2012 to examine how wages behave over the course of structural transformation. We find that wage employment between 2000 and 2012 displays the patterns one would expect for an economy undergoing structural transformation, with employment shares shifting from agriculture to industry and services, and from rural to urban areas and larger cities within urban areas. These shifts, as well as a shift to nonroutine occupations and routine manual occupations outside of agriculture, are associated with an improvement in average wages. Finally, simple Mincerian wage regressions confirm that jobs in larger firms and big cities are associated with significantly higher wages—even more so for women. Overall, our results are consistent with the notion that policies that encourage the expansion of the formal sector and employment in larger firms are crucial for development.

Suggested Citation

  • Rana Hasan & Rhea Molato, 2019. "Wages Over the Course of Structural Transformation: Evidence from India," Asian Development Review, MIT Press, vol. 36(2), pages 131-158, September.
    • Handle: RePEc:tpr:adbadr:v:36:y:2019:i:2:p:131-158
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/adev_a_00134
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    References listed on IDEAS

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    More about this item

    Keywords

    structural change; wage level and structure; wages;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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