As seen in Chart 1, an increase in India’s exports by $100 per worker, translates into an increase in average annual wages by Rs 572 per worker. Higher exports also help pull more workers in the formal sector. As seen in Chart 2, increased exports can help explain the conversion of about 800,000 jobs from informal to formal between 1999 and 2011. However, the increase in wages is of a much larger magnitude for college graduates and urban workers, with the rural and the less educated workers not appearing to benefit.
While this would suggest that the well-off benefit more from trade, increasing the scale of exports would help spread the benefits more widely, notes the report.
As shown in Chart 3, depending on the scale of export growth, higher exports per worker in India would increase wages on average between Rs 1,000 and Rs 8,000 and reduce informality between 2.1 million and 12.3 million workers (Chart 4). But the extent to which specific segments of society would benefit depends on the type of export shock.
For instance, as seen in Charts 5 and 6 an increase in labour-intensive production is likely to have a broader impact on the wages of workers, even those in rural areas. It would also lead to a larger reduction in informality, particularly for the less educated and those in rural areas.
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