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The Puzzle of Jobless Growth in Indian Manufacturing

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  • Bhalotra, Sonia R

Abstract

In the 1980s, India experimented with deregulation in industry and trade. Manufacturing output accelerated but employment declined, raising doubts about the desirability of the policy reforms. This paper proposes an explanation of employment behavior in terms of increases in total factor productivity, in actual hours worked, and in the product wage. Using robust methods, it is shown that neglect of hours worked results in a substantial upward bias in estimates of the wage elasticity. Growth in productivity and hours appears to be associated with the reform process, with the increase in hours worked reflecting recovery of lost time. To the extent that hours must hit a ceiling, the drop in employment on this count is expected to be temporary. Other things being equal, employment prospects appear to depend considerably on the course of productivity growth. Copyright 1998 by Blackwell Publishing Ltd

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Article provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics & Statistics.

Volume (Year): 60 (1998)
Issue (Month): 1 (February)
Pages: 5-32

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Handle: RePEc:bla:obuest:v:60:y:1998:i:1:p:5-32

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