Divergence, Not Convergence: Regional Wage Inequality and Industrial Development in India’s Formal Manufacturing sector

Divergence, Not Convergence: Regional Wage Inequality and Industrial Development in India’s Formal Manufacturing sector | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Divergence, Not Convergence: Regional Wage Inequality and Industrial Development in India’s Formal Manufacturing sector Prithwijit Das Thakur This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-8789145/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract Despite decades of economic liberalization and industrial policy interventions, regional divergence is observed in the formal manufacturing sectors of India. Analysing Annual Survey of Industries (ASI) data from 2022-23 across 35 states and union territories, this study employs beta-convergence and sigma-convergence methodologies to examines whether the economically backward regions are able to catch up with advanced states in formal sector wage levels. Consistent positive coefficient is observed through beta analysis (β = 0.980–1.409, p < 0.001) indicating wage divergence proof rather than convergence. Sigma convergence metrics reveals extreme inequality: the Gini coefficient touches 0.693, with a P90/P10 wage ratio of 1,550.6 and a maximum to minimum ratio of 39,957.6. K-means cluster analysis distinguishes three distinct wage clubs showing convergence within but persistent divergence in-between groups. Industrial maturity works as a strongest predictor of occupational wage structures (R²= 0.961), while employment formalization in respect to benefit-to-wage ratio critically enhances aggregate wage levels (β = 23.37, p = 0.015). In contrast to human capital theory, literacy rates show a statistically non-significant negative relationship with wages, suggesting structural impediments beyond educational attainment. These results encounter the assumption of automatic wage convergence and demonstrate the needs for fiscal targeted and institutional interventions to address regional wage inequality in India’s development agenda. Wage convergence and divergence Regional inequality Industrial development Beta-convergence Sigma-convergence India Occupational wages Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-8789145","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":585871286,"identity":"2fd1ffeb-2bd9-40da-92eb-6bd1c3f6c4a6","order_by":0,"name":"Prithwijit Das Thakur","email":"data:image/png;base64,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","orcid":"","institution":"University of Mumbai","correspondingAuthor":true,"prefix":"","firstName":"Prithwijit","middleName":"Das","lastName":"Thakur","suffix":""}],"badges":[],"createdAt":"2026-02-04 17:23:22","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-8789145/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-8789145/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":104399639,"identity":"318d1871-a822-4a92-b3f7-4fce672cc4fd","added_by":"auto","created_at":"2026-03-11 12:07:01","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":818220,"visible":true,"origin":"","legend":"","description":"","filename":"FullArticle.pdf","url":"https://assets-eu.researchsquare.com/files/rs-8789145/v1_covered_a2eef934-1c47-4133-89ce-0b94dbe14ea7.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"Divergence, Not Convergence: Regional Wage Inequality and Industrial Development in India’s Formal Manufacturing sector","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":true,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Wage convergence and divergence, Regional inequality, Industrial development, Beta-convergence, Sigma-convergence, India, Occupational wages","lastPublishedDoi":"10.21203/rs.3.rs-8789145/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-8789145/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eDespite decades of economic liberalization and industrial policy interventions, regional divergence is observed in the formal manufacturing sectors of India. Analysing Annual Survey of Industries (ASI) data from 2022-23 across 35 states and union territories, this study employs beta-convergence and sigma-convergence methodologies to examines whether the economically backward regions are able to catch up with advanced states in formal sector wage levels. Consistent positive coefficient is observed through beta analysis (β\u0026thinsp;=\u0026thinsp;0.980\u0026ndash;1.409, p\u0026thinsp;\u0026lt;\u0026thinsp;0.001) indicating wage divergence proof rather than convergence. Sigma convergence metrics reveals extreme inequality: the Gini coefficient touches 0.693, with a P90/P10 wage ratio of 1,550.6 and a maximum to minimum ratio of 39,957.6. K-means cluster analysis distinguishes three distinct wage clubs showing convergence within but persistent divergence in-between groups. Industrial maturity works as a strongest predictor of occupational wage structures (R\u0026sup2;= 0.961), while employment formalization in respect to benefit-to-wage ratio critically enhances aggregate wage levels (β\u0026thinsp;=\u0026thinsp;23.37, p\u0026thinsp;=\u0026thinsp;0.015). In contrast to human capital theory, literacy rates show a statistically non-significant negative relationship with wages, suggesting structural impediments beyond educational attainment. These results encounter the assumption of automatic wage convergence and demonstrate the needs for fiscal targeted and institutional interventions to address regional wage inequality in India\u0026rsquo;s development agenda.\u003c/p\u003e","manuscriptTitle":"Divergence, Not Convergence: Regional Wage Inequality and Industrial Development in India’s Formal Manufacturing sector","msid":"","msnumber":"","nonDraftVersions":[{"code":1,"date":"2026-02-05 07:30:44","doi":"10.21203/rs.3.rs-8789145/v1","editorialEvents":[{"type":"communityComments","content":0}],"status":"published","journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true}}],"origin":"","ownerIdentity":"b990003d-40dc-46af-a1ae-8090dc21afd6","owner":[],"postedDate":"February 5th, 2026","published":true,"recentEditorialEvents":[],"rejectedJournal":[],"revision":"","amendment":"","status":"posted","subjectAreas":[],"tags":[],"updatedAt":"2026-03-01T17:24:09+00:00","versionOfRecord":[],"versionCreatedAt":"2026-02-05 07:30:44","video":"","vorDoi":"","vorDoiUrl":"","workflowStages":[]},"version":"v1","identity":"rs-8789145","journalConfig":"researchsquare"},"__N_SSP":true},"page":"/article/[identity]/[[...version]]","query":{"redirect":"/article/rs-8789145","identity":"rs-8789145","version":["v1"]},"buildId":"XKTyCvWXoU3ODBz1xrDgd","isFallback":false,"isExperimentalCompile":false,"dynamicIds":[84888],"gssp":true,"scriptLoader":[]}