ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Wage Inequality in India

Decomposition by Sector, Gender and Activity Status


The web version of this article corrects a few errors that appeared in the print edition.

Wage differentials are present among various groups and sectors of the economy. The primary motivation of this paper is to investigate the structure of wage inequality and employment in India with the 61st round (2004-05) household survey on employment and unemployment conducted by the National Sample Survey Office. The study measures comprehensively different dimensions of wage inequality as observed in the Indian labour market by using the Gini inequality index. In analysing the structure of wage inequality it considers three major sectors, the public, private formal and informal sectors. Wage inequality in the private formal sector is higher than the inequality even in the informal sector. Wage differentials in India are higher in rural as compared to urban areas, and are higher among women than among men workers. Simple decompositions of wage inequality by sectors reveal that a significant part of wage inequality is accounted for by inequality among individuals between rather than within sectors for every type of working person.


The author is thankful to Amiya Kumar Bagchi for valuable comments on earlier versions of this paper. Serious comments by an anonymous referee are also gratefully acknowledged. The usual disclaimer applies.

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