Dynamics of rural labour markets: Evidence from longitudinal panel data in India

Given the slow structural transformation of employment in rural areas in India, this paper tries to probe into the structural transformation in semi-arid tropics of India, by using high frequency longitudinal panel data from 1975 to 2010. The results show that, up to early 1980s, structural transformation was very slow and most of the workers were dependent on agriculture for their livelihoods. Most workers spent more number of days in self-employment in agriculture with very few days in paid work. Both men and women have more leisure time during the 1970s compared to early 2000s. However, from 2001 onwards, there has been an increase in nonfarm employment opportunities in both self-employment and also paid work mostly for rural male, but most of the rural women remained in farm sector. Results also shows that even though education improves chances of getting higher remunerative employment, still rural labour markets are segmented based on social groups to some extent. The high unemployment among educated youth indicates the skill gap in rural labour markets. However, many parents are investing heavily in children's education with the expectation of getting higher paid urban jobs. Over the period, gender and caste differences in wage rates decreased slightly, but are not eliminated wholly. Men work more days than women in economic activities, however If we take domestic work into consideration women work moredays than men. Attached labourer are almost eliminated with the implementation of bonded labour (abolition) act and most of them shifted to different occupations including cultivation or casual agricultural labourer or took up petty businesses. This act benefited the scheduled caste bonded labourer, who became free. There is significant increase in farm mechanisation in recent years due to scarcity of labour and higher wage rates. The results also show that the real wage rates started increasing much before the introduction of a major employment guarantee program (MGNREGA) and mostly driven by increased non-farm employment opportunities, rural-urban linkages, migration and increased agricultural productivity.