Wages Across Regions: Responsiveness to Macro and Policy Variables

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Abstract
This study reflects on the inter-regional wage variations. If labour is highly mobile then as per the neoclassical constellation wages are expected to get equalized across space. But the variations in wages and earnings across the Indian states are seen to be significant. This prompted us to investigate the wage variation issue further. The factors considered in the study include physical infrastructure, financial infrastructure, health, growth indicator, prices, policy variable such as minimum wage set by the state governments and the fiscal deficit, which may impact on wages across space. Findings are indicative of the fact that wages and earnings respond to the infrastructure and health related indicators. Economic growth and productivity rise also show a positive impact. Besides, the minimum wage policy of the government is seen to be effective, particularly in the case of those who are located at the lower rungs. The real wages/earnings do not show any significant responsiveness to price index though the association is not totally absent. Finally, the policy implications of the study are brought out.

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