Trade and Inequality in India
To study the effects of the dramatic economic reforms undertaken in India in the early 1990s on inequality, this paper examines Theil inequality as well as other inequality measures constructed using Indian household expenditure survey data from 1988-2005. Overall inequality shows some variation over the period, falling between 1988 and 1994, rising between 1994 and 2000, but falling again by 2005. The evolution of inequality in the post reform period is thus non-monotonic. A similar inequality trend is seen within most Indian states over this time period. Finally, the change in inequality across households within states is found to be uncorrelated with the change in state-level measures of tariff and non-tariff protection.
For helpful comments and suggestions, we are grateful to Jagdish Bhagwati, Rana Hassan, Amartya Lahiri, Arvind Panagariya and conference participants at the Columbia-NCAER conference on Trade, Poverty, Inequality and Democracy held in New Delhi during March 31-April 1, 2011. Work on this paper has been supported by Columbia University's Program on Indian Economic Policies, funded by a generous grant from the John Templeton Foundation. The opinions expressed in the paper are those of the author(s) and do not necessarily reflect the views of the John Templeton Foundation or the National Bureau of Economic Research.