India's Increasing Skill Premium : Role of Demand and Supply

Using micro data for India from 1983 to 2005, this paper finds that the tertiary (college)-secondary (high school) wage premium has been increasing in India over the past decade and that this increase differs across age groups. The increase in wage premiums has been driven mostly by younger age grou...

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Main Author:	Azam, Mehtabul
Format:	Journal Article
Language:	EN
Published:	2012
Subjects:	Higher Education and Research Institutions I230 Human Capital Skills Occupational Choice Labor Productivity J240 Wage Level and Structure Wage Differentials J310
Online Access:	http://hdl.handle.net/10986/4822

id	okr-10986-4822
recordtype	oai_dc
spelling	okr-10986-48222021-04-23T14:02:19Z India's Increasing Skill Premium : Role of Demand and Supply Azam, Mehtabul Higher Education and Research Institutions I230 Human Capital Skills Occupational Choice Labor Productivity J240 Wage Level and Structure Wage Differentials J310 Using micro data for India from 1983 to 2005, this paper finds that the tertiary (college)-secondary (high school) wage premium has been increasing in India over the past decade and that this increase differs across age groups. The increase in wage premiums has been driven mostly by younger age groups while older age groups have not experienced any significant increase. Using a demand and supply model with imperfect substitution across age groups (developed in Card and Lemieux, 2001), this paper demonstrates that workers are not perfect substitutes across age groups. The paper finds that the increase in the wage premium has come mostly from demand shifts in favor of workers with a tertiary education. More importantly, the growth rate of demand for tertiary educated workers relative to secondary educated workers was fairly stable in the 1980s and the 1990s. However, the relative supply played an important role not only in determining the extent of increase in wage premium, but also its timing. The increase in relative supply of tertiary workers during 1983-1993 negated the demand shift; as a result, the wage premium did not increase much. But during 1993-1999, the growth rate of the relative supply of tertiary workers decelerated, while relative supply became virtually stagnant during 1999-2004. Both these periods saw an increase in the wage premium as the countervailing supply shift was weak. 2012-03-30T07:29:54Z 2012-03-30T07:29:54Z 2010 Journal Article B.E. Journal of Economic Analysis and Policy: Topics in Economic Analysis and Policy 19351682 http://hdl.handle.net/10986/4822 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article India
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	EN
topic	Higher Education and Research Institutions I230 Human Capital Skills Occupational Choice Labor Productivity J240 Wage Level and Structure Wage Differentials J310
spellingShingle	Higher Education and Research Institutions I230 Human Capital Skills Occupational Choice Labor Productivity J240 Wage Level and Structure Wage Differentials J310 Azam, Mehtabul India's Increasing Skill Premium : Role of Demand and Supply
geographic_facet	India
relation	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description	Using micro data for India from 1983 to 2005, this paper finds that the tertiary (college)-secondary (high school) wage premium has been increasing in India over the past decade and that this increase differs across age groups. The increase in wage premiums has been driven mostly by younger age groups while older age groups have not experienced any significant increase. Using a demand and supply model with imperfect substitution across age groups (developed in Card and Lemieux, 2001), this paper demonstrates that workers are not perfect substitutes across age groups. The paper finds that the increase in the wage premium has come mostly from demand shifts in favor of workers with a tertiary education. More importantly, the growth rate of demand for tertiary educated workers relative to secondary educated workers was fairly stable in the 1980s and the 1990s. However, the relative supply played an important role not only in determining the extent of increase in wage premium, but also its timing. The increase in relative supply of tertiary workers during 1983-1993 negated the demand shift; as a result, the wage premium did not increase much. But during 1993-1999, the growth rate of the relative supply of tertiary workers decelerated, while relative supply became virtually stagnant during 1999-2004. Both these periods saw an increase in the wage premium as the countervailing supply shift was weak.
format	Journal Article
author	Azam, Mehtabul
author_facet	Azam, Mehtabul
author_sort	Azam, Mehtabul
title	India's Increasing Skill Premium : Role of Demand and Supply
title_short	India's Increasing Skill Premium : Role of Demand and Supply
title_full	India's Increasing Skill Premium : Role of Demand and Supply
title_fullStr	India's Increasing Skill Premium : Role of Demand and Supply
title_full_unstemmed	India's Increasing Skill Premium : Role of Demand and Supply
title_sort	india's increasing skill premium : role of demand and supply
publishDate	2012
url	http://hdl.handle.net/10986/4822
_version_	1764392894620237824

India's Increasing Skill Premium : Role of Demand and Supply

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