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Oxford Economic Papers Advance Access published online on May 7, 2008
Oxford Economic Papers, doi:10.1093/oep/gpn015
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© Oxford University Press 2008 All rights reserved

Keeping up with the Vaishyas? Caste and relative standing in India

Fredrik Carlsson*, Gautam Gupta{dagger}, and Olof Johansson-Stenman{ddagger}

*Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE-40530 Göteborg, Sweden; e-mail: fredrik.carlsson{at}economics.gu.se
{dagger}Department of Economics, Jadavpur University, Kolkata-700 032, India; e-mail: gautamju{at}yahoo.com
{ddagger}Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE-40530 Göteborg, Sweden; e-mail: olof.johansson{at}economics.gu.se


  Abstract

People care about relative, and not only absolute, income. This paper investigates the importance of relative income within and between castes in the Indian caste system, using a choice experimental approach. The results indicate that slightly more than half of the marginal utility of income comes from some kind of relative income effects, on average. This is comparable to the results from previous studies in other countries. Belonging to a low caste and having a low family income are associated with higher concern for relative income. Moreover, an increase in the mean income of the caste to which the individual belongs, everything else held constant, reduces utility for the individual. Thus, the negative welfare effect of having a reduced relative income compared to the own caste average income dominates the positive welfare effect due to increased relative income of the own caste compared to the income of other castes.

Key Words: JEL classifications: C91 • D63 • H21


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