Determinants of inter-industry wage structure in India

Abstract

This paper deals with an analysis of the main factors ex plaining the inter-industry wage differentials in manufac turing sector of the Indian economy. It examines the basic theoretical framework which can provide a satisfactory explanation of the inter-industry wage structure. Taking the cross-section data on the two-digit level manufacturing in dustries for two years 1960 and 1964, the regression tech nique is applied to test alternative models based on the "expected ability to pay" and the "technology" hypotheses. The major finding of the study is that the skill-mix and productivity are the two main determinants of inter-indus try wage structure in India. The policy implication of this finding is that if a more rational wage structure is to be evolved in the organized manufacturing sector in India, it can be done most effectively by following the policy of mo dernization and rationalization of the existing low produc tivity industries wh;le envisaging rapid development of the industrial sector during the course of the next decade.