International Trade Competition, Market Power, and Gender Wage Differentials in India’s Manufacturing Sector

This study addresses the question of how increasing competitive forces from India’s trade liberalization have affected the wages of male and female workers. Neoclassical theory implies that costly discrimination against female workers should diminish over time with increased competition (Becker 1971). We incorporate this idea into a theoretical model of competition and industry concentration in which the net effect of international trade on the gender wage gap could be positive or negative depending on changes in market parameters and the discrimination coefficient. Our study tests the theoretical model using repeated cross sections of India’s NSSO household survey data merged with trade and production data from 1983 to 2004. We employ OLS and Fixed Effects techniques at the industry level to estimate the relationship between the male-female residual wage gap and measures of domestic concentration and international trade competition. Results indicate that increasing openness to trade is associated with a widening in the wage gap in India’s concentrated manufacturing industries.