Convergence Across Castes

Chenyu Hou ()
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Chenyu Hou: Simon Fraser University, https://www.sfu.ca/economics/about/faculty/current/sev--chenyu--hou/

Discussion Papers from Department of Economics, Simon Fraser University

Abstract: India witnessed a sharp education and wage catch-up by the historically disadvantaged scheduled castes and tribes (SC/STs) towards non-SC/ST levels during the period 1983-2012. We provide a structural explanation for the catch-up using a multi-sector, heterogenous agent model where individuals differ in ability and their caste identity. Castes differ in the costs of schooling and accessing sectoral labor markets which results in caste-based talent misallocations. We show that exogenous productivity growth can explain 72 percent of the observed wage convergence. The primary driver of convergence in the model is the fall in real costs of schooling with growth. We provide independent evidence in support of this mechanism.

Date: 2024-12
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