Disadvantage and discrimination in self-employment: caste gaps in earnings in Indian small businesses

Smriti Sharma,Ashwini Deshpande

doi:10.1007/s11187-015-9687-4

Abstract

AbstractUsing the 2004–2005 India Human Development Survey data, we estimate and decompose the earnings of household businesses owned by historically marginalized social groups known as Scheduled Castes and Tribes (SCSTs) and non-SCSTs across the earnings distribution. We find clear differences in characteristics between the two types of businesses with the former faring significantly worse. The mean decomposition reveals that as much as 55 % of the caste earnings gap could be attributed to the unexplained component. Quantile regressions suggest that gaps are higher at lower deciles, providing some evidence of a sticky floor. Finally, quantile decompositions reveal that the unexplained component is greater at the lower and middle deciles than higher, suggesting that SCST-owned businesses at the lower and middle end of the conditional earnings distribution face greater discrimination.

Highlights

Ethnic and racial discrimination in labor markets, as manifested in wage and occupational attainment gaps, has been widely examined (e.g., Altonji and Blank 1999; Antecol and Bedard 2004; Atal et al 2009)
Our objective has been to assess the presence of caste-based discrimination in small household businesses using the large-scale nationally representative India Human Development Survey of 2004–2005
Our results show that Scheduled Castes and Tribes (SCSTs) businesses fare significantly worse in terms of owner’s education, household economic status and business characteristics, as compared to their non-SCST counterparts

Summary

Introduction

Ethnic and racial discrimination in labor markets, as manifested in wage and occupational attainment gaps, has been widely examined (e.g., Altonji and Blank 1999; Antecol and Bedard 2004; Atal et al 2009). In India too, labor market discrimination against historically disadvantaged caste groups, i.e., the former untouchables (Scheduled Castes or SCs) and marginalized tribal groups (Scheduled Tribes or STs), is well documented, with SCs and STs earning significantly lower wages and being allocated to less prestigious jobs as compared to upper castes, after controlling for their productive characteristics (Banerjee and Knight 1985; Madheswaran and Attewell 2007; Das and Dutta 2007).. Our paper attempts to fill this gap for India, by assessing caste discrimination in household non-farm businesses (‘businesses’ hereafter), which has been possible due to the recent availability of good-quality earnings data for such businesses. Discrimination could be directed toward larger low-caste businesses too: In personal interviews, rich SC entrepreneurs have discussed their individual battles with caste discrimination as they started their businesses. There are other ethnographic accounts as well (Jodhka 2010; Prakash 2010) that indicate the presence of persistent disadvantage and discrimination in the self-employment arena, which forms the motivation for the present study

Methods

Results

Discussion

Conclusion