Skill premium: What caused the ‘mismatch’?

Increasing returns to skill is often attributed to the rising relative demand for skilled workers driven by advancement in skill-complementary technology. In the context of India this paper argues that fluctuations in skill-premia in different sectors are primarily because of the shift in the relative supply of skilled labour that has hardly any relation to technological advancements. In the long run the paper argues that there seems to be little possibilities of endogenous growth in technology outpacing the rising supply of educated workers because of the existence of large labour reserves. Hence, conjectures such as increasing spiral of demand and supply for skilled workers mutually determining each other, often conceived in the context of developed countries do not hold in countries such as India.