Decomposing Skill Based Wage Inequality in India: An Application of Theil Index

Sonu Madan () and Manisha Yadav
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Sonu Madan: Indira Gandhi University
Manisha Yadav: Indira Gandhi University

The Indian Journal of Labour Economics, 2022, vol. 65, issue 4, No 3, 967-979

Abstract: Abstract Wage inequality is one of the most prominent topics of discussion across the world. The study is an attempt to estimate wage inequality in-between and within various skill-based occupational groups in India. For the purpose, Theil index, one of the most important measures in generalised entropy family, has been utilised on the unit-level data of Periodic Labour Force Survey, 2017–18 (PLFS) pertaining to 94,460 workers employed across skill-categorised broad occupational groups. Wage inequality has observed to be highest in occupational groups requiring highly skilled workers (skill level 4), and the same is witnessed lowest among workers in occupations requiring low level of skill (skill level 1). The study found occupational diversity, diverse nature of work assignment in accordance with cognitive ability of workers the main reasons behind increasing wage inequalities.

Keywords: Wage inequality; Skill level; Occupational groups; Theil index (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s41027-022-00405-6

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