GVC Participation and Labour Market Disparities: Exploring the Effects on Employment and Wage Inequality

ABSTRACT Using plant‐level data from the Annual Survey of Industries (ASI), this paper examines the effects of global value chains (GVCs) on employment and wage premiums in the Indian manufacturing sector. The study examines the GVC effects on (i) employment, (ii) the wage premium of skilled and unskilled workers, and (iii) skilled and gender wage inequality. The results indicate that participation in GVCs is positively associated with employment and wages, and a stronger impact on skilled workers. Further, GVC participation significantly increases wage gaps between skilled and unskilled workers. There are several policy implications from the study: (i) the skills of workers should be improved through training and re‐tooling, (ii) a strong monitoring framework on the dynamics of the labour market should be developed in relation to unbundling the effects of the GVC, and (iii) strong forward‐looking labour market institutions and policies are required to increase the “future skills” of local workers.