 Good morning everybody. Today I will present the paper. The topic is liberalized trade policy and inequality, evidence from post-MFA India and some theoretical issues. This is jointly written by Dr. Shoybal Kaur of Centre for Studies in Social Sciences Calcutta. Now in this paper we will actually talk about the impact of some liberalized trade policy on the wage and income inequality and wage inequality, employment inequality and we have taken our country India for this case study and we will also substantiate the empirical findings by some theoretical structure. First we talk about the varying implications of international trade policies on the labor market of a country that are found in the literature. The wage employment impacts of unilateral as well as multilateral trade reforms have been studied by some of the studies like Goldberg and Pavnik, Athanasio Goldberg and Pavnik, Hanson-Hadison etc. Then Ziliberti et al. explores the relationship between economic reforms and industry level adjustments at the country level and Topalovka and Kandelwal offers substantial evidence on effect of trade reform on the formidable productivity in India. Whereas Marauni shows that for Tunisia, withdrawal of MFA has led to an increase in inequality both in terms of wage and unemployment. Our objective of the study is that we deal with a specific trade policy in this paper and this involves the withdrawal of the multi-fiber arrangement which actually controlled or monitored the international trade in textiles and aprils for two to three decades. And since 1995 it was decided by the WTO that it should be phased out globally and it was integrated into the GATT and it took place over 10 years period that is it was a decade long phase out plan. We find the implications of the trade policy reform on the aggregate labor earnings where the aggregate labor earning is defined as a total labor cost, it comprises of salaries, wages, bonus, excretion at the firm level for the workers involved in the textile and allied industries and not only that we also discuss the possible regional differences in the firm concentration and the wage cost arising from the dismantling of such MFA quota. Now the background is like that the economic liberalization in India since 1991 gave the much needed trust and therefore now the textile industry has become the largest industry in India as well as it is one of the largest in the world and not only that it is the largest foreign exchange provider in India and it is the second largest employment generating sector in India and the employing over 35 million people distributed between formal and informal organizations. Furthermore the contribution of this industry is very important because it contributes GDP 3 to 4 percent of the GDP and 14 percent of total industrial production. Despite that India's need for an exchange journey despite that India's share in the world export of textile is still quite low if we compare it with the Asian giants like China, South Korea, Singapore and Hong Kong and therefore the export promotion policies has led to has strongly supported this sector and this sector has become quite sensitive to changing global economic order. Now Indian textile industry started to integrate fully with WTO from January 2005 and the MFA that is a multi fiber arrangement was replaced by the ATC that is the agreement on textile and clothing but the entire phase out was not did not take place just instantly or just in a certain period of time it actually there was four stages in stage one on 1st January 1995 actually 16 percent of the quotas were phase out then on 1st January 1998 17 percent and cumulative effect was 33 percent then some on 2002 the cumulative effect was 51 percent and on 1st January 2005 the 100 percent quota was liberalized. The impact of this change in the policy on the textile workers in India therefore needs to be studied. Now our study has certain uniqueness in the sense that it not only empirically verifies the relative strength of different important parameters in determining the impact of this kind of liberalization on aggregate labor income of the industry but it also captures some inequality aspects inequality in both in terms of intersectoral inequality and inter regional inequality and not only that the empirical findings are also theoretically substantiated by this paper. Now for the empirical model we construct a panel of 47 major manufacturing as well as exporting firms in India between the years 1998 to 2012 there were actually 750 firms in our database but we have chosen this 47 on the basis of the criteria that each of this firm has actually more than the mean output level for each year if we take in the total sales value of for each year. Our data source is a database for Senator for monitoring Indian economy CMIE and the explanatory variable is taken as a changes in the total labor cost and sorry this is the explained variable and the explanatory variables include the value of textiles and clothing termed as exports, capital stock termed as capital, NFA that is a net fixed asset, total value of sales and the profit of the tax that is paid. A number of interaction terms are also incorporated to measure the relative strength of this each of these variables and the main hypothesis is that we assume that whether the total labor cost borne by the firms has gone down due to the withdrawal of NFA. First this is the section one that is a firm level analysis first we have studied the different types of indices for the firm level data in order to study the changes in the degree of concentration of the firms over the years as depicted in table one and here we can show that in the third column the values of 10 firm concentration ratios are plotted in the fourth column the 50 firm concentration ratio and we have shown in the last column the Herschmann-Harthindel index of concentration. The CR-10 is calculated on the basis of top by identifying the top 10 firms and calculated their shares in total sales similarly 50 firms and the Herschmann-Harthindel index is the sum of the shares sum of the squares of the which is basically the sum of the squares of the shares of the large 50 firms or top 50 firms in the industry and we can show that if we compute the first and the final year of our study then there is an increase in concentration in terms of all these indices and also some intricate studies we can do if we get the time later and all the indices demonstrate an increasing trend of concentration and this is quite natural because the intuition suggests that when the IMF was removed all the countries that would potentially enjoy a protected market because of the existence of the assured country quota they are now exposed to the global competition and the effect could be felt directly at the firm level and therefore only the price, cost and quality competitive firms could compete and they survive in the market because we saw with the other international competitors and the small and the medium firms have to exit or have to leave the market. These we have two possible outcomes. First the higher concentration in the bigger firm sizes may offer better wages because of the complementarities and productivity growth or secondly it may happen that the small and the medium firms may push the wage to a lower level because of the increase, because of the decrease in demand for level. Now we start with our econometric model. The detailed econometric specification for GA firms over t-time periods are defining the panel with firm fixed effect is given by this, where AW is the aggregate wage bill and the other variables are shown accordingly and two interaction terms are incorporated that is beta 6 and beta 7 are the coefficients of those interaction terms. The interaction terms are one is export interacted with capital and the other is export interacted with NFA. In table 2 we can show the descriptive statistics like this and table 3 we have shown the results of panel regression using firm level data. Actually in this table we have reported three sets of regression within the ambit of the broad specification of the equation 1. Just the estimate 1 shows the values of different estimates when export NFA interaction term is dropped in the second estimate shows in the results of the second estimate the export capital interaction term is dropped where in the third the export capital interaction term as well as the sales value is dropped. We want to see the strength of each variable separately just by dropping 1 by 1 and taking the estimates and we have shown that when the quotas has been liberalized and exports has been increased then there is a positive relation with the labour cost and that says that doubling of export would raise the labour cost bill by 3.5 percent to 5.9 percent. However, since the rise in capital stock would lower the employment of labour therefore the increase in export attributed by capital would also show a negative relation with the labour cost. Similarly with the same reasoning we can show that a rise in exports attributed to a rise in NFA significantly decreases the labour cost bill although standard and rise in NFA seems to push the phones towards allocating more resources on labour. The second part of our study is a state level analysis where the firm level panel is supplemented by the state level panel between 1998 to 2008 and to document whether the aggregate labour income varies across the states or diverges across the states or not and that will offer some indication of regional inequality. For this we have chosen 11 major textile producing states of India that contributes to 80 percent of the total production and the results of the panel regression is shown in Table 4 which shows that the aggregate state level wage bill falls as the profit level rises. So, there is a negative relation with the profit this may happen because when the firms the higher profit making firms they are supposed to employ more capital than labour. So, actually this may happen or this is possible either with greater capitalization replacing labour or with the retrenchment of labour from the organized units movement of labour into the less organized units actually decreases the labour cost and the relation with the other variables like factories and number of factories and income the change in total labour cost is positive and significant. This we show the impact on regional disparity where the regional disparity is reflected by the variations in the number of factories, variation in the firm level profit, variation in the sales across the states between 98 to 2008 and the variation is captured by the mean deviation of the logarithmic values of the number of factories, the values of sales etcetera, but as some firms are negative profits in some of the years. So, we could not take the logarithmic values of profits that lead to data attrition and therefore, we have taken the nominal values of profits only. And the results of this panel regression also shown in table 5 where we see that the mean deviation of the logarithmic values of wages has a strong positive relation with the mean deviation of the logarithmic values of number of factories and logarithmic values of number of sales. It has also positive relation with profit, but that is not so significant. These are the observations of the table 5. Now, we come to the theoretical model where we consider a small open developing country that produces two commodities at the world prices, p star j, where we have two commodities like x and y, x is an import competing good that is protected. We have assumed that it is protected by a tariff whereas, y is an export commodity receiving the benefits of protection via bilateral quotas. We have also assumed that x is relatively capital intensive, y is relatively low skill intensive good. And going to the benefit of quota y, we are assuming that y technically enjoys some kind of subsidy at a rate of at a rate ace on unit price. And therefore, the international price is p star y which is more than the free trade price that is p y into 1 plus s. And the other standard assumptions are taken that is perfectly competitive firms and all the firms are perfectly competitive the full employment of resources etcetera. And also we have considered that in the x sector that is the organized sector all the workers are part of the labor union and which fixes their wage at w bar which is above the market clearing wage w. But per unit of capital in equilibrium is it is it always mobile the capital is mobile because perfectly mobile across the sectors. So, r can be varied. The factor endowment equations are shown accordingly this is these are the production the production functions are shown by x equal to x l x k x and y l y q y. Marginal products are positive, but they are diminishing. These are the profit functions where w bar is shown that is the fixed wage in the x sector and y that is the market clearing wage small w. The first order of conditions are shown accordingly in 5, 6 and 7 equations. And these equations help to determine fully the model and we have 5 parameters p star s l bar k bar and w bar. Now, let us consider the removal of quota we have considered it in the similar way as a reduction in subsidy. And if there is a reduction in subsidy that is equivalent to a fall in the international price of commodity y. Then we have done this kind of comparative study by changing the values of d s and d t and rearranging we get this equations for moiler theorem. We can show this we are just going through this spittily, but we can show we can say the intuition behind this results. The condition is shows that in the x sector the change in labour employment with change in subsidy that is positive if the condition holds by 9. The expression 9 gives the condition where the changes are positive. It means that when the subsidy is removed when the subsidy is removed then the price of y falls and when the price of y falls that implies that the supply for the commodity y will fall and therefore demand for labour and capital will fall. But in the x sector w is fixed and therefore r will remain also fixed because there is no change in tariff and therefore r cannot fall in y sector also because r will be mobile from x to y. So, when there is a fall in s there will be a fall in w. So, it says that there is an inter sectoral wage inequality the x in the x sector the wage remains the same, but in the y sector that is the import that is the export sector the low skill sector there the wage decreases at the cost of wage decreases, but if we want to maintain the full employment. Similarly for capital and then for wage we have shown this that w ds is positive if this condition holds. This equation 13 this offers a very general condition which shows that a simultaneous change could even raise the wage in the export sector when the subsidy is lifted. If the relative change in the two rates exceeds a combination of change in the marginal productivities of capital and labour. So, in essence we can say that our analytical exercise shows there is a possibility that a stand stand alone reduction in subsidy hurts labour in sector y, but just we have missed some point here that when there is no change in tariff then one kind of impact we get, but when the simultaneous there is a simultaneous reform in the industry like improvement in or like the liberalization of tariff also in the x sector that was the import competing goods sector then we get a different impact. What happens when along with the liberalization of quota in the import competing sector if there is a decrease in tariff also then due to this the employment in the wage sector in the x sector that will employment in the x sector will fall and therefore, but w is fixed. So, therefore, r may fall and r will fall in y too and therefore, to reinstate the equilibrium w will increase if the fall in r is greater than the fall in p star 1 plus s. It is shown in this conclusion that wage does not change in when there is a simultaneous fall in the protection in sector x that lowers the demand for both capital and labour. Since wage does not change in x therefore, r falls and by perfect capital mobility of the sectors the rental return also falls in y if the fall in r is much stronger than the fall in p star 1 plus into 1 plus s then w much rise. So, these are our final inferences that it seems that in the post welfare regime the Indian firms in the textile and clothing producing sector are increasingly catching up with the international competitiveness, but at the cost of higher industrial concentration at home for surviving the cost competition. The second is that the exportability of the firms has increased significantly and it has a positive impact on the aggregate labour income so long as the sector does not become highly capital intensive. The state level energy shows the decrease in aggregate wage bill when the profit level rises and it is very much substantiated by the periodical part that because of the retrenchment of labour from the retrenchment of labour or capital the resources from the other organised units. Further, the regional variations in firm concentration and values of sales impart positive impact on the wage dispersion over time. However, the variation in firm level profit has no or very little impact on the labour cost. The theoretical exercise also shows this and the quota withdrawal is unambiguously harmful for the labour although it is possible to have employment growth. However, when related economic reforms are also initiated in the economy the detrimental effect is not so imminent. Thank you.