Indian Labour Markets and Returns to Education

Abstract

The present study is an attempt to examine the trends in returns to education in the context of long-term economic growth in India during 1983 to 2009–2010. It outlines various forms of inequality issues prevalent in the Indian labour markets for male as well as female workers in the rural and the urban areas as regular and casual workers. The unit level data from six rounds of National Sample Survey during 1983, 1987–1988, 1993–1994, 1999–2000, 2004–2005 and 2009–2010 were used for this study. The Mincer wage function was estimated separately for male and female workers and also for regular and casual workers. To account for sample selection bias, the Heckman two-step procedure was used. The results reveal that returns to education were higher in casual labour market for rural and urban male workers till some intermediate levels. For female workers, the returns to education have not changed much in both the rural and the urban areas, with an increase in level of education over time. However, the returns to education have improved for regular workers, indicating towards higher wages for improved education over time, as a result of increased employment opportunities, especially in the tertiary sector, for better educated in India during the last decade of relatively faster economic growth.