Income Inequality in India : The Role of Openness and Technology Diffusion

Income inequality has been growing since the mid-1980s, with tremendous intensification in India's degree of openness and technological breakthrough. In this context, this study attempts to analyse two questions: whether trade openness, financial openness and technology diffusion improve or worsen income inequality in India? And, does the relationship between openness and income inequality rest on the technology diffusion? Using the Bounded ARDL model, the results confirmed that economic (in aggregate), trade openness, and technology diffusion significantly worsen income distribution in the short & long run. The financial openness impact on inequality is trivial. The results also confirmed that the relationship between openness and income inequality depends on technology diffusion that significantly improves income distribution. The policy implications are mentioned in the conclusion section