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Skill Sorting and Production Linkages: Evidence from India
Author(s) -
Asuyama Yoko
Publication year - 2019
Publication title -
the developing economies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.305
H-Index - 30
eISSN - 1746-1049
pISSN - 0012-1533
DOI - 10.1111/deve.12193
Subject(s) - endogeneity , production (economics) , sorting , economics , quality (philosophy) , sample (material) , developing country , selection bias , selection (genetic algorithm) , labour economics , econometrics , demographic economics , macroeconomics , economic growth , statistics , computer science , philosophy , chemistry , mathematics , epistemology , chromatography , artificial intelligence , programming language
Contrary to the theoretical predictions of most studies, this paper empirically shows that high‐skilled workers in India are sorted into industries with weaker production linkages. I hypothesize that such a reverse sorting pattern (negative sorting) occurs because the returns to skill become lower in industries with stronger production linkages as a result of substantial quality deterioration. Such substantial quality deterioration as the size of production linkages grows is likely to occur in developing countries such as India, which is characterized by a large pool of low‐skilled labor, poor infrastructure, and less‐advanced technology. Using both individual‐ and industry‐level data from the National Sample Surveys and input–output tables for India in 1999 and 2009, I find consistent evidence in favor of this hypothesized mechanism. The results are robust when accounting for possible endogeneity and selection biases and controlling for alternative reasons.