Consideration of the nexus between Institutions and Outreach. -The study of the caste discrimination in India -

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1 Consderaton of the nexus between Insttutons and Outreach -The study of the caste dscrmnaton n Inda - Kyosuke Kurta, Assstant Professor at the Graduate school of Asan-Pacfc studes, Waseda Unversty, Nsh Waseda Bldg. 6F 611, Nsh-Waseda, Shnjuku-ku, Tokyo , Japan E-mal: kurta@aon.waseda.jp 1. Introducton Recently, Capacty Development (CD) approach s one of the man paradgms n the debates over the role of development AIDs. One of the mportant dfferences of CD from the other approaches s to take account of the sustanablty of the effect of the AID project. The donors have to consder how the stuaton would be changed or unchanged after the project has completed. In other words, most mportant thng to secure the sustanablty of the project s that recpents and the socety have the capacty to take over the results of the project that have been acheved. In ths sense, t s not dffcult to understand that the socety faces wth the change n ther tradtonal customs and rules as nsttutonal changes occur caused through the project. Thus, t s necessary to dscuss CD n vew of nsttutonal changes. Frst of all, I would lke to show the approach to drectly explore the change and generaton of nsttutons through the mplementaton of the project of CD. There has been rapd accumulaton of the researches assocated wth CD; most of them are conducted by JICA, UNDP and the other ad agences to valdate the effcency of CD approach. Although there are broad ranges of nsttutons from the local customs at the vllage level to the legal and poltcal structures at the country level, target nsttuton of ad program tend to be relatvely small because the geographc coverage of ad project s normally regonal or sub-regonal level. For example, when an ad agency proceed a project, such as several constructons of vllage hosptals or clncs n the provnce, they mght have to concern about the local tradton, knshp, herarchc structure, socal captal, and the others. In ths case, t looks very smlar to the anthropologc research. Thus, most mportant thngs n ths approach are to observe the nsttutonal change n ongong project, and to evaluate the mplcaton on the achevement of the project wth CD. Although capablty approach 1 by Amartya Sen doesn t drectly deal wth the relatonshp between CD and nsttuton, t mght be consdered as a dfferent example of ths approach. Recently, work s proceedng wth the development of the tool to evaluate the mpact of the ad project usng capablty approach. Alkre (2000) nssts the usablty of cost-beneft analyss to assess the project 1 Refer to Sen (1999), Comm (2008). 142

2 wth capablty approach 2. In any cases, mportant thng for ths approach s to have the knowledge about the socal and economc structure of the target socety; otherwse t s almost mpossble to make analyss followng ths approach. Excludng these case studes, there are not large accumulatons of prevous studes related to the relatonshp between CD and nsttutons. In addton, t mght be possble to thnk that CD approach s not purely the objectve of academc research, but just the nstrument to conduct the ad project. I partally agrees wth ths vewpont. However, researchers have to express understandng for the necessty to deepen the dscusson about ths ssue. Thus, t s necessary to take a prelmnary step to deal wth ths ssue. I thnk t s almost mpossble to drectly dscuss ths ssue; however, there are a lot of prevous studes analyzng the relatonshp between economc growth and nsttuton, or between economc growth and ad. One of the purposes of ths paper s to make a bass for further dscusson wth the help of these prevous studes. For that purpose, I would lke to show an analyss n ths paper; t s to analyze the relatonshp between caste nsttuton and ther ncome n Inda usng household mcro data. In macro emprcal studes, nsttutons, whch are targeted n the analyss, s manly dscuss about the relatonshp between economc growth and poltcal nsttuton, such as democratc condton, governance, corrupton, legal system, fnancal system, and the others 3. However, the coverage of ad project s normally at the regonal or provncal level wthn a country. Thus, mcro emprcal studes are sutable for the dscusson of the relatonshp between the CD and nsttuton. Recent studes ndcate that the dscrmnaton caused by the caste system reduces. Thus, the purpose of second analyss s to examne the transton of dscrmnaton related to the wage dfference between Scheduled Castes (SCs)/Scheduled Trbes (STs) and the others n 17 years, 1983 to 1999, usng Natonal Sample Survey mcro data. In partcular, I focus on the effect of the renforcement of the reservaton polcy on the wage dfference over the whole wage dstrbuton. Ths analyss of the relatonshp between polcy change (renforcement of the reservaton polcy) and welfare (the transton of wage dstrbuton) help us to challenge ths dffcult topc. 2. wage dfference between caste classes n Background The caste system n Inda s the tradtonal, heredtary system of socal restrcton and socal stratfcaton, enforced by law or common practce, based on endogamy, occupaton, economc status, 2 For more detal and recent dscussons, refer to Comm (2008). 3 For more detals, refer to Mauro (1995), Knack and Keefer (1995), Perott (1996), Acemoglu, Johnson and Robnson (2001), Kosac (2003). Especally, Acemoglu, Johnson and Robnson (2006) summarzes the ponts of the recent development at ths approach. 143

3 race, ethncty for a long perod of tme. To allevate t, Indan government has consttuted the affrmatve acton plan and reservaton polcy n educaton and publc job, where 22.5 % of unversty places and government jobs have been reserved for Scheduled Castes (SCs) and Scheduled Trbes (STs) snce Recently, Inda s Congress-led government has told companes to hre more SCs, STs and Other Backward Classes (OBSs). Manmohan Sngh, the prme mnster, has gven warnng that strong measures wll be taken f companes do not comply (Economst [2007]). That s to say, government has renforced the affrmatve acton. In response to ths, despte some problems related to reservaton polcy, many companes and organzatons launch ther own affrmatve-acton schemes. Accordng to Kjma (2006), the dfference of log per capta expendture between SCs/STs and the others decrease from (between STs and others), (between SCs and others) n 1983 to 0.267, n 1999, respectvely. Table1. Transton of the dfference of log wage Year SCs/STs Others Dfference In addton, table1 shows the dfference of log wage between SCs/STs and the others decrease from 1983 to It s sad that the dscrmnaton due to the caste system s not as severe as t used to be. Snce 1991, embarkng on full-fledged economc reform, macro economc performance n Inda has been very remarkable. Especally, the demand for hgh-sklled labor s ncreasng. Fgure1 Dfference of log wage between SCs/STs and the others Quantle 144

4 On the other hand, there have not been remarkable changes n the unsklled labor and low-sklled labor. Fgure1 shows the dfference of log wage between SCs/STs and the others n 1983 and 1999 followng ther wage quantles. It s obvous that there are large dfferences n terms of the rato to mprove the wage dfference accordng to ther wage quantles. It ndcates that the reservaton polcy n prvate company and the ncrease of labor demand n hgh-value added sectors lke IT sector lead to ncrease relatve wage of SCs/STs to the others at the hgher quantle. Even benefts of economc boomng are not equally dstrbuted all over SCs and STs. Thus, the purpose of ths paper s to examne the reason of transton of wage dfference between SCs/STs and the others n 17 years, 1983 to 1999, usng Natonal Sample Survey mcro data. In partcular, I focus on the effect of the reservaton polcy on the wage dfference between SCs/STs and the others. In general, t s beleved that the mplement of reservaton polcy makes the dscrmnaton and wage dfference between groups reduce. It s obvous that t has postve effect on Indan stuaton, but I would lke to pont out the other effects of the reservaton polcy on them. There have been already qute a few researches n terms of wage dfference and dscrmnaton based on the caste system. Most of them are based on the decomposton approaches, whch are poneered by Oaxaca (1973) and Blnder (1974). Although ths decomposton method s very smple and easy to nterpret, there are some crtcsms n terms of the methodologcal problem (Cahuc and Zylberberg (2004)). Therefore, to adopt the quantle regresson decomposton technque, whch s proposed by Machado and Mata (2006), I would lke to solve these problems and shed the new lght on t. I explan about the Machado and Mata decomposton method (MMD) n secton2 and the NSS data and emprcal model n secton3. I dscuss the emprcal results n secton4 and conclude n last secton Quantle regresson decomposton method In general, for the analyss of the dfference between groups, most prevous lteratures have adopted the decomposton method based on the results from OLS, whch are poneered by Oaxaca (1973) and Blnder (1974). In smple terms, Blnder-Oaxaca decomposton dvdes the dfference of wage n two portons, one s the contrbuton of characterstcs to the dfference (ex. schoolng years, experment, and so forth) between groups, and the other one s the contrbuton of the evaluaton (coeffcents) to the dfference. Although ths decomposton method s very smple and easy to nterpret, there are some crtcsms n terms of the methodologcal problem (Cahuc and Zylberberg (2004)). One s that ths decomposton method needs the nformaton of only the average of the ncome dstrbuton (or wage, consumpton, etc.). Gven the nformaton n terms of entre ncome dstrbuton, usng these nformaton make us get the more frutful results compared to Blnder-Oaxaca decomposton. It s the decomposton based on quantle regresson results (Mueller (1998), Garca et al (2001)). 145

5 Gven X, the condtonal dstrbuton of y at quantle θ s below, Quant ( y X ) X, 0,1. (1) It s decomposed nto two components B A B A B A B A Q ( ) ( ) ( ) ( y Q y X X X ) resdual (2) where superscrpts A and B means each group, and also Q θ (y ) s the emprcal dstrbuton functon of ncome y. The frst term and second term n rght hand of equaton (2) are consstent wth the contrbuton of the characterstcs and the contrbuton of the evaluaton n Blnder-Oaxaca decomposton method, respectvely. However, there s stll the problem n terms of the possblty to compare nto two groups at all quantles. If the standard devaton of the dstrbuton of group A s dfferent from that n group B, t mght be dffcult to compare two dstrbutons at the varous ponts of the dstrbuton. Machado and Mata (2006) propose the alternatve decomposton procedure, whch combnes quantle regresson 4 and a bootstrap approach to allevate ths problem. Melly (2005) put all the mportant ponts of ths approach nto a few sentences. It s summarzed as follows: If U s unformly dstrbuted on [0,1], then F -1 (U)has dstrbuton F. Thus, for a gven X, and a random θ~u[0,1], X has the same dstrbuton as ( y X ). If, nstead of keepng X, fxed, we draw a random X from the populaton, X has the same dstrbuton as y. Formally, the estmaton procedure nvolves 7 steps: 1. Generate random sample of sze m from a U[0,1]: u 1,,u m, 2. Estmate for each group m dfferent quantle regresson coeffcents: ( SCs / STs, Others u u ; 1,..., m) 3. Generate for each group a random sample of sze m wth replacement from the ndependent m SCs / STs Others varables of X, denoted by X, X m (usng bootstrap method) / / ˆ / m SCs STs SCs STs SCs STs Others Others, ˆOthers y X y X are random sample of sze m from 1 1 m 4 The presence of heteroskedastcty can be accounted for by estmatng quntle regressons followng Deaton (1997), Koenker and Bassett (1978, 1982), and Koenker (2005). 146

6 the margnal wage dstrbuton of y consstent wth the lnear model. 5. Generate a random sample of the counterfactual dstrbuton. { C cf Others ˆ SCs / STs y X random sample from the wage dstrbuton that would have prevaled n SCs/STs f all ndependent varables had been dstrbuted as n Others. m 1 s a 6. In order to decompose the dfference n the wage dstrbuton nto dfferences n the coeffcents and characterstcs dfferental, we follow the equaton below, Others SCs / STs Others count count SCs / STs Q ( y ) Q ( y ) [ Q ( y ) Q ( y )] [ Q ( y ) Q ( y )] resdual In rght hand, the frst term s the contrbuton of the evaluaton (coeffcents) and the second term s the contrbuton of the characterstcs. 7. To repeat ths procedure n each year, we can draw the dynamcs of caste wage nequalty n Inda n 1983 and Data and Model The data sources for Inda are Natonal Sample Surveys (NSS). The Natonal Sample Survey (NSS), ntated n the year 1950, s a naton-wde, large-scale, contnuous survey operaton conducted n the form of successve rounds. In ths paper, I use the employment and unemployment surveys n 1983 and 1999/2000, whch surveyed wth detaled questonnare on household demography, ndvdual s age, educaton attanment, employment status, and socal status, coverng approxmately 100,000 households and 500,000 ndvduals. I dvde datasets nto subgroups defned by caste, SCs/STs and the others. Followng the defnton of actvty status n NSS, I defne that the ndvduals, who were employed nto Indan datasets, are the people, work as (1) regular wage/salary worker, (2) casual wage publc worker, and (3) other casual wage worker. Based on some lteratures, we adopt age, age square, sex dummy (female s the reference group), educatonal dummy (low, mddle, and hgh: low s the reference group), occupaton dummy ( Professonal, Admnstratve, Clercal, Sales, Servce, Agrcultural, and others : others s the reference group.), sector dummy(urban and rural: rural s the reference group), and regon dummy as the ndependents varables. Dependent varable s log of real monthly wage. Please see the Table2 n detal of the varables. 147

7 Table 2 The Summary of varables 148

8 3.4. Results Table 3 The results of Decomposton Table3 and Fgure2 show and plot the rato of each contrbuton. The contrbuton of characterstcs s larger than the contrbuton of coeffcent at any ponts of dstrbuton n 1983 and 149

9 1999. At the same tme, even f the wage dfference decreases from 1983 to 1999 (Fgure1), the compostons of contrbutons from each varable are not much dfferent n 1983 and 1999 n most quantles. Although the dscrmnaton to SCs/STs n terms of evaluaton on wage s reflected n the contrbuton of coeffcent, t s relatvely a small effect compared to the contrbuton of characterstcs. The wage dfference of 60 to 90% s explaned by the contrbuton of characterstcs, such as the dfference of accumulaton of human captal and the occupatonal structure between SCs/STs and the others. Especally, the contrbuton of educaton and occupaton are relatvely hgh about 20-30% and 20-50%, respectvely (Table4). Table 4: Contrbuton of Characterstcs Both the contrbuton of educaton and occupaton occupy 65 to 80 % of all contrbuton of characterstcs. That s to say, over 50 % of wage dfference between SCs/STs and the others are explaned by the contrbuton of characterstcs related to educaton and occupaton. It s obvous that there are large dfference n terms of educaton and occupatonal structure between SCs/STs and the others n 1983 and Therefore, reservaton polcy related to the reservaton of the postons n 150

10 advanced educaton for SCs/STs has the postve effect on reducton of educatonal nequalty. However, what s the effect of the reservaton polcy on the occupatonal structure? In fact, the results, on whch the contrbuton of occupaton has largest effect and tme nvarant, are consstent wth the caste system, whch s based on the functonal classfcaton. Thus there s lttle dscrmnaton by caste system and dfference of wage wthn an occupaton, but there are large wage dfferences between occupatons. Ths knd of phenomenon s nothng specal. The most mportant thng s that t s related to caste system. Therefore, t s hard to change jobs for mprovement of ther welfare. Although t s ndsputable fact that there are creatons of new jobs, such as workers n IT sector and servce sector, whch do not belong to old caste system, t s qute lmted a number and ts dmenton. That s to say, there are two types of lmtaton: one s the lmtaton of the choce of the jobs, and the other s the labor demand lmtaton of new jobs. Therefore, the contrbuton of occupaton has largest effect on the wage dfference at all quantle. There s more to t. If the purpose of the reservaton polcy and affrmatve acton s to elmnate the dscrmnaton related to caste system and to releve the poor SCs/STs, decreasng the dfference at hgher quantles s not enough to acheve t. It should be accompaned by reducng the dfference at the all quantles or at the lower quantles (pro-poor reducton of wage dfference). Otherwse, reservaton polcy and affrmatve acton could lead to ncrease nequalty wthn SCs/STs. Table5 Transton of Gn soeffcents Dfference SCs/STs Others Total Table 5 shows the change of gn coeffcents n 1983 and Both gn ncrease, but the rate of SCs/STs s larger than others. It mght not be completely unrelated to the renforcement of reservaton polcy. Although reservaton polcy has postve effect on the reducton of dscrmnaton related to caste system, t has been also ponted out many problems n terms of t. It can be sad that ntroducton of affrmatve acton plan after the WWII caused the deteroraton of nternal dsparty n SCs/STs. In fact, there are two types of SCs/STs n Inda: one s the wealthy SCs/STs, who beneft from affrmatve acton, get the opportunty of the human captal accumulaton and employment, whereas the other s the poorer SCs/STs (say, they are poorest), who have faled to take advantage of t and been stuck n poverty trap. The problem s that there s the possblty to consoldate the stuaton of dfferentated SCs/STs by the resent economc boomng. The wealthy SCs/STs can rde the wave of economc boomng because of ther hgher human captal accumulaton; on the other hand, the poorer SCs/STs reman poor despte the economc growth. Consequently, the nequalty wthn SCs/STs mght ncrease, and then, there mght be the conflct wthn SCs/STs. In fact, t s sad that there are a lot of conflcts related to the ratng of SCs, STs, and OBCs. 151

11 3. Concluson and Implcaton to the understandng of the relatonshp between CD and IC It s summarzed as follows that the reservaton polcy has the effect on the reducton of dscrmnaton between SCs/STs and the others, but t has the negatve effect on the dsparty wthn SCs/STs. The wealthy SCs/STs grab the chance to ncrease ther wage thanks to the economc boomng snce 1991 and renforcement of reservaton polcy, whch leads to reduce the wage dfference between SCs/STs and the others at the hgher quantles. Therefore, although the average of wage dfference has decreased, wage nequalty wthn SCs/STs has expanded because the poorer SCs/STs have not benefted from economc boomng. The most mportant thng n Indan stuaton s that the caste system and the reservaton polcy could strengthen the dfferentated stuaton and make t be persstence n future. Therefore, Indan government should make effort not only to mplement the reservaton polcy, but also to provde the chance to change people s well beng. For example, to buld the vocatonal tranng school wth free tuton and scholarshp for the poor leads to allevate twst structure wthn SCs/STs. Fgure3 Structural understandng of the affrmatve acton polcy n Inda As Fgure3 shows, the mcroeconometrc analyses allow us to thnk about the relatonshp between ndvdual behavor and polcy or nsttutonal change at the mcro level. Through the accumulaton of the mcroeconometrc analyses, there has got to be a place to deepen the understandng of the relatonshp between CD and nsttutonal change. 152

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