Arthshastra Indian Journal of Economics & Research

Open Access Open Access  Restricted Access Subscription Access

Distribution of Income in India : The Story of Divergence Since 1991


Affiliations
1 Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi - 110 067, India

   Subscribe/Renew Journal


The issue of income distribution holds great significance; it is one of the oldest questions in economics, touched upon by prominent thinkers. Growth of income and its distribution have long been perceived as intertwined issues. Growth of profits at the expense of wages can have far-reaching effects for the economy. This study focused on a particular facet of inequality. The marginalization of small peasants, agricultural labour, and the presence of a huge pool of non-farm wage workers has been fuelling incomes of the rich not just in Indian agriculture, but manufacturing and services as well. The informal and unskilled workers in the industry have taken the hit to allow room for further growth in the incomes of owners as well as managerial and skilled classes. With this backdrop, the mainstay of this research work was to examine the trends in profit and wage share for India and the skewed distribution of factor shares, particularly in the post reform period, spanning manufacturing and services sectors. The paper discussed the connect between abysmal conditions in the Indian agriculture sector and rising profits as well as growth in wage inequality in manufacturing and service sectors. Data from multiple sources was utilized to explore the inequality in the distribution of factor incomes in India. The paper highlighted that both income and wealth inequality in India have grown in the post reform period. The study found empirical evidence in support of growing capital incomes in all the three sectors and rising wage differentials in manufacturing and service sectors.

Keywords

Wage Share, Profit Share, Factor Income Distribution, Income Inequality, Wealth Inequality, Wage Differentials.
User
Subscription Login to verify subscription
Notifications
Font Size

  • Anand, I., & Thampi, A. (2016). Recent trends in wealth inequality in India. Economic & Political Weekly, 51(50), 59 – 67. Retrieved from https://www.epw.in/journal/2016/50/special-articles/recent-trends-wealthinequality-india.html

  • Basole, A., & Narayan, A. (2019). Long-run performance of the organised manufacturing sector in India: Aggregate trends and industry-level variation (CSE Working Paper 2018 – 19). Retrieved from Centre for Sustainable Employment Azim Premji University website :https://cse.azimpremjiuniversity.edu.in/wpcontent/uploads/2018/06/Basole_Narayan_Performance_Organised_Manufacturing.pdf

  • Basu, D., & Das, D. (2015). Profitability in India’s organized manufacturing sector : The role of technology, distribution, and demand (Department of Economics, Working Paper 2015/04). Retrieved from University of Massachusetts Amherst website : https://scholarworks.umass.edu/cgi/viewcontent.cgi?article=1184&context=econ_workingpaper

  • Centre for Sustainable Employment, Azim Premji University. (2018). State of working India 2018. Retrieved from https://cse.azimpremjiuniversity.edu.in/wpcontent/uploads/2019/02/State_of_Working_India_2018-1.pdf

  • Chakraborty, S. (2015). Indian economy in transition and role of industrial disputes. Arthshastra Indian Journal of Economics and Research, 4(6), 43 – 54. https://doi.org/10.17010/aijer/2015/v4i6/84920

  • Ellis, L., & Smith, K. (2007). The global upward trend in the profit share (BIS Working Paper No. 231). Retrieved from Bank for International Settlements website : https://www.bis.org/publ/work231.htm

  • Giovannoni, O. G. (2014). What do we know about the labor share and the profit share ? Part I: Theories (Levy Economics Institute of Bard College Working Paper No. 803). Retrieved from Levy Economics Institute website : http://www.levyinstitute.org/pubs/wp_803.pdf

  • Guerriero, M. (2019). The labor share of income around the world: Evidence from a panel dataset (ADBI Working PaperNo.920). Retrieved from Asian Development Bank website : https://www.adb.org/sites/default/files/publication/484346/adbi-wp920.pdf

  • Guerriero, M., & Sen, K. (2012). What determines the share of labour in national income ? A cross-country analysis (IZA Discussion Paper No. 6643). Retrieved from Institute of Labor Economics (IZA) website : http://ftp.iza.org/dp6643.pdf

  • Himanshu. (2018). India inequality report 2018 : Widening gaps. Oxfam India. Retrieved from https://www.oxfamindia.org/sites/default/files/WideningGaps_IndiaInequalityReport2018.pdf

  • International Labour Organization. (2018). India wage report: Wage policies for decent work and inclusive growth. Retrieved from https://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/---sronew_delhi/documents/publication/wcms_638305.pdf

  • Kaldor, N. (1955). Alternative theories of distribution. Review of Economic Studies, 23(2), 83 – 100. https://doi.org/10.2307/2296292

  • Karabarbounis, L., & Neiman, B. (2013). The global decline of the labor share (NBER Working Paper No. 19136). Retrieved from National Bureau of Economic Research website : https://www.nber.org/papers/w19136

  • Piketty, T., & Goldhammer, A. (2014). Capital in the twenty-first century. Cambridge Massachusetts : The Belknap Press of Harvard University Press.

  • Piketty, T., & Zucman, G. (2014). Capital is Back: Wealth-income ratios in rich countries, 1700 – 2010. Quarterly Journal of Economics, 129 (3), 1255 – 1310. doi:10.1093/qje/qju018

  • Roy, S. (2012). Changing factor incomes in industries & occupations. Review of long term trends (ISID Working Paper 2012/03). Retrieved from Institute for Studies in Industrial Development website : http://isid.org.in/pdf/WP1203.pdf

  • Saha, P., & Verick, S. (2016). State of rural markets in India (ILO Asia-Pacific Working Paper Series). Retrieved from International Labour Organization website : https://www.ilo.org/wcmsp5/groups/public/---asia/---robangkok/---sro-new_delhi/documents/publication/wcms_501310.pdf

  • Singhari, S., & Madheswaran, S. (2018). Wage structure and wage differentials in formal and informal sectors in India : Evidence from NSS data. Indian Journal of Labour Economics, 60, 389 – 414.

  • Subramaniam, D., & Ben, J. (2018). The relevance of skill development in the Indian context. Arthshastra Indian Journal of Economics and Research, 7(1), 25 – 36. https://doi.org/10.17010/aijer/2018/v7i1/122135

  • Vakulabharanam, V. (2010). Does class matter? Class structure and worsening inequality in India. Economic and Political Weekly, 45(29), 67 – 76. Retrieved from https://www.epw.in/journal/2010/29/specialarticles/does-class-matter-class-structure-and-worsening-inequality-india


Abstract Views: 269

PDF Views: 0




  • Distribution of Income in India : The Story of Divergence Since 1991

Abstract Views: 269  |  PDF Views: 0

Authors

Jasmin
Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi - 110 067, India

Abstract


The issue of income distribution holds great significance; it is one of the oldest questions in economics, touched upon by prominent thinkers. Growth of income and its distribution have long been perceived as intertwined issues. Growth of profits at the expense of wages can have far-reaching effects for the economy. This study focused on a particular facet of inequality. The marginalization of small peasants, agricultural labour, and the presence of a huge pool of non-farm wage workers has been fuelling incomes of the rich not just in Indian agriculture, but manufacturing and services as well. The informal and unskilled workers in the industry have taken the hit to allow room for further growth in the incomes of owners as well as managerial and skilled classes. With this backdrop, the mainstay of this research work was to examine the trends in profit and wage share for India and the skewed distribution of factor shares, particularly in the post reform period, spanning manufacturing and services sectors. The paper discussed the connect between abysmal conditions in the Indian agriculture sector and rising profits as well as growth in wage inequality in manufacturing and service sectors. Data from multiple sources was utilized to explore the inequality in the distribution of factor incomes in India. The paper highlighted that both income and wealth inequality in India have grown in the post reform period. The study found empirical evidence in support of growing capital incomes in all the three sectors and rising wage differentials in manufacturing and service sectors.

Keywords


Wage Share, Profit Share, Factor Income Distribution, Income Inequality, Wealth Inequality, Wage Differentials.

References





DOI: https://doi.org/10.17010/aijer%2F2020%2Fv9i1%2F151355