Trade Liberalization and Intergenerational Occupational Mobility in Urban India

44 Pages Posted: 2 Oct 2015 Last revised: 6 Nov 2016

See all articles by Reshad Ahsan

Reshad Ahsan

University of Melbourne - Department of Economics

Arpita Chatterjee

UNSW Australia Business School, School of Economics

Date Written: November 2016

Abstract

In this paper, we make two novel contributions to the literature on trade and inequality. First, we show that the same mechanism that causes greater cross-sectional inequality, higher relative demand for skill, also facilitates intergenerational occupational mobility. In particular, we develop a stylized model that shows that the innovation induced by international trade causes an increase in the employment share of high-skill occupations. In turn, this allows an increasing number of sons to enter better occupations than their father. We then exploit spatial variation in exposure to trade liberalization in urban India to test our model’s prediction. Our empirical results confirm that sons that live in urban districts with a greater exposure to trade liberalization have a higher probability of being in a better occupation than their father. Further, as predicted by our model, we find that this positive impact of trade liberalization on intergenerational mobility is stronger in relatively technologically advanced districts. In a second contribution, we show that increased investment in education alone need not facilitate intergenerational occupational mobility. Instead, it only does so in urban districts where there has been a sufficient increase in the employment share of high-skill occupations.

Keywords: Trade and Labor Markets, Intergenerational Mobility

JEL Classification: F14, F16, J62

Suggested Citation

Ahsan, Reshad and Chatterjee, Arpita, Trade Liberalization and Intergenerational Occupational Mobility in Urban India (November 2016). UNSW Business School Research Paper No. 2015-23, Available at SSRN: https://ssrn.com/abstract=2668002 or http://dx.doi.org/10.2139/ssrn.2668002

Reshad Ahsan

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

HOME PAGE: http://https://sites.google.com/site/reshadahsan/home

Arpita Chatterjee (Contact Author)

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

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