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The UN states that inequalities are determined along with income by otherfactors - gender, age, origin, ethnicity, disability, sexual orientation,class, and religion. India, since the ancient period, has socio-politicalstratification that induced socio-economic inequality and continued till now.There have been attempts to reduce socio-economic inequality through policyinterventions since the first plan, still there are evidences of social andeconomic discrimination. This paper examines earning gaps between the forwardcastes and the traditionally disadvantaged caste workers in the Indian labourmarket using two distinct estimation methods. First, we interpret theinequality indicator of the Theil index and decompose Theil to show within andbetween-group inequalities. Second, a Threefold Oaxaca Decomposition isemployed to break the earnings differentials into components of endowment,coefficient and interaction. Earnings gaps are examined separately in urban andrural divisions. Within-group, inequalities are found larger than betweengroups across variables; with a higher overall inequality for forward castes. Ahigh endowment is observed which implies pre-market discrimination in humancapital investment such as nutrition and education. Policymakers should firstinvest in basic quality education and simultaneously expand post-graduatediploma opportunities, subsequently increasing the participation in the labourforce for the traditionally disadvantaged in disciplines and occupations wherethe forward castes have long dominated.

Interpreting the Caste-based Earning Gaps in the Indian Labour Market: Theil and Oaxaca Decomposition Analysis