This article calculates the magnitude of wage differentials across industries in the organized manufacturing sector of India and identifies the major determinants of wage differentiation among the industries. Using data from Annual Survey of Industries in India for the period from 2000–2001 to 2015–2016, this study shows that mean wage is less in labour-intensive industries compared to the capital-intensive industries. The results of panel regression of annual average wage on various industry-specific factors show that productivity of labour is the most important factor in wage determination, and productivity largely depends on capital–labour ratio. The other significant factors in this regard are farm size, amount of profit and proportion of casual and female workers in total employment. Important policy implication of this study is that regulatory wage fixation and wage bargaining outcomes are not as significant as productivity differentials in explaining wage gaps across industries.
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