Talent Allocation in India : Breaking Down Barriers
Presented at Becker Friedman Institute and Chicago Booth (UChicago) conference- Discrimination in the 21𝑠𝑡 Century: Fostering Conversations Across Fields; Econometric Society Australasia Meeting (ESAM); ISI Delhi; Delhi School of Economics among others.
Awarded runner-up prize at the three minutes thesis (3MT) competition- Media summaries: University of Queensland- IIT Delhi.
When individuals are not engaged in occupations according to their ability or ‘talent’, we observe talent misallocation in an economy. This paper documents that talent allocation improved in India from 1983 to 2012. To explain this, I focus on two frictions: the first one is the barrier to attaining higher education, and the second is labor market discrimination (quantified by wage differences). I use similarity indices to examine the patterns of these frictions and link them with talent allocation. Using the Blinder-Oaxaca decomposition technique, I find that convergence in educational attainment accounts for all of the improvement in talent allocation for men belonging to the disadvantaged scheduled caste and tribe (SC/ST) group. During the evaluation of the education quota’s impact on the same group, I observed no substantial role of the policy in reducing barriers to accessing higher education.
Structural Transformation and decline in caste based frictions in India
I investigate the barriers hindering structural transformation. The paper documents that between 1993 and 2012, there was labor reallocation from the agriculture sector to non-agricultural sectors in India. This shift was led by workers from marginalized groups, as their proportional share in non-agricultural sectors increased during this period. Additionally, I find that the sectoral returns to education vary for workers belonging to different caste groups and employ a multi-sectoral model to elucidate this. When examining the existing barriers that elevate the mobility cost to switch across sectors, the model focuses on barriers arising from unobserved (innate abilities) and observed (formal years of schooling) human capital. Using data on wage gains from moving to non agriculture sectors, I determine that the data is more aligned with model implied barriers in the former case, and that unobserved innate abilities play a role. Moreover, I discover that even though barriers declined for both caste groups we observe only workers from the disadvantaged caste groups moving into the non agriculture sectors (especially service sector). The findings suggest a potential influence of policies promoting vocational or non-formal education, aiding in the upskilling of SC/ST workers and facilitating their transition to more productive sectors. In contrast to the United States, I also observe sizable barriers to labor reallocation towards more productive non-agriculture sectors in India.