It’s not who you know, but who you are: Explaining income gaps of stigmatized-caste business owners in India

by Prateek Raj, Thomas J. Roulet, Hari Bapuji

Scholars across disciplines and around the world have diverted research attention to rising income inequalities across groups and strategies to reduce them. The literature has broadly identified human capital and social capital as two potential tools to facilitate economic mobility and to reduce inequalities. However, it is not known whether these tools work equally well for stigmatized groups, particularly in societies with systemic inequalities. Analyzing data from a pan-India survey, we show that business owners from stigmatized groups (i.e., Dalits in India, who are stigmatized as untouchables) experience a business income gap of around 16% compared to others, including those business owners who are from communities that are disadvantaged but are not similarly stigmatized. We find that, instead of being reduced, this gap in fact increases at higher levels of social capital, especially bridging social capital, illustrating the social processes of stigmatization that limit the benefits that Dalits can reap from social capital. By contrast, Dalits can reap similar income benefits as others from human capital. Our results show that human capital helps stigmatized groups mitigate the implications of stigma, but social capital does not.