Decomposition Analysis of Earnings Inequality in Rural India: 2004-2012

32 Pages Posted: 7 Jun 2016

See all articles by Shantanu Khanna

Shantanu Khanna

University of California, Irvine

Deepti Goel

School of Arts and Sciences, Azim Premji University

René Morissette

Statistics Canada

Abstract

We analyze the changes in earnings of paid workers (wage earners) in rural India from 2004/05 to 2011/12. Real earnings increased at all percentiles, and the percentage increase was larger at the lower end. Consequently, earnings inequality declined. Recentered Influence Function decompositions show that throughout the earnings distribution, except at the very top, both changes in 'worker characteristics' and in 'returns to these characteristics' increased earnings, with the latter having played a bigger role. Decompositions of inequality measures reveal that although the change in characteristics had an inequality increasing effect, chiefly attributable to increased education levels, inequality declined because workers at lower quantiles experienced greater improvements in returns to their characteristics than those at the top.

Keywords: earnings, inequality, earnings distribution, rural India

JEL Classification: J30, J31, O53

Suggested Citation

Khanna, Shantanu and Goel, Deepti and Morissette, René, Decomposition Analysis of Earnings Inequality in Rural India: 2004-2012. IZA Discussion Paper No. 9974, Available at SSRN: https://ssrn.com/abstract=2790011

Shantanu Khanna (Contact Author)

University of California, Irvine ( email )

P.O. Box 19556
Science Library Serials
Irvine, CA 62697-3125
United States

Deepti Goel

School of Arts and Sciences, Azim Premji University

Sarjapur
Undergraduate Campus
Bangalore, 562125
India

René Morissette

Statistics Canada

Ottawa
Canada

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