The Impact of Trade Liberalization on Gender and Caste Groups in India

Marilyn Jacob, U.S. Department of Treasury

This paper investigates whether there have been beneficial wage gains for women and minorities because of increased competition following liberalization of trade in India. Based on Becker’s model of taste-based employer discrimination, it is expected that as an economy becomes more competitive, employer discrimination should decline. The trade liberalization reforms that began in 1991 in India increased competition by lowering protection in certain manufacturing industries. Firms who could indulge a taste for discrimination when trade protection allowed supernormal profits, may not have been able to continue to do so as competition eliminated such profits. Using individual-level data and tariff data from pre- and post-reform periods, the paper finds that wage differences reduced for female workers relative to male workers in the more open manufacturing sector industries. However, there is no significant effect on the wage differential between low and high caste workers.