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September 18, 2025Asian Economic Papers

Why is Labor Receiving a Declining Share of Income in India? Role of Trade and Market Share Reallocation

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Authors

CVC. VeeramaniABAnwesha Basu

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Overview

Empirical analysis shows labor share decline in India due to trade effects and structural transformation.

Key Points

  • Labor share decline in India is primarily driven by market share reallocation and structural transformation.
  • Firm-level evidence indicates a positive relationship between trade openness and labor share, albeit partial offset by domestic dynamics.
  • India's atypical structural transformation skipped labor-intensive industrialization, moving directly to capital-intensive sectors.
  • Tariff liberalization and global value chain participation contribute to labor share but do not fully counterbalance structural challenges.

Cite This Study

Veeramani et al. (2025) studied this question.

synapsesocial.com/papers/68d433a3713b0b5dfea72d2chttps://doi.org/10.1162/asep.a.1
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