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Are all labor regulations equal? Evidence from Indian manufacturing

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  • Ahsan, Ahmad
  • Pagés, Carmen

Abstract

Taking advantage of variation across Indian states in labor reforms, this paper studies the economic effects of labor dispute resolution legislation (DL) and employment protection legislation (EPL) in the manufacturing sector. We find that laws that increase the cost of dispute resolution or employment protection substantially reduce registered sector employment and output, although the cost of industrial dispute regulation on output is larger. There is evidence of strong complementarities on labor laws: The output or employment costs of EPL are larger in states and periods where it is more difficult to resolve disputes, and not very important when such costs are low. Workers do not benefit from EPL or DL, as they do not increase the labor share or the wage bill, although EPL has a small positive effect on earnings per worker. Labor-intensive industries, such as textiles, are the hardest hit by amendments that increase employment protection while capital-intensive industries are the most affected by laws that increase the cost of labor dispute resolution. Journal of Comparative Economics 37 (1) (2009) 62-75.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Comparative Economics.

Volume (Year): 37 (2009)
Issue (Month): 1 (March)
Pages: 62-75

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Handle: RePEc:eee:jcecon:v:37:y:2009:i:1:p:62-75

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Web page: http://www.elsevier.com/locate/inca/622864

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Keywords: Employment protection legislation Dispute resolution legislation Manufacturing Employment India;

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References

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  1. James J. Heckman & Carmen Pagés, 2004. "Introduction to "Law and Employment: Lessons from Latin American and the Caribbean"," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 1-108 National Bureau of Economic Research, Inc.
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  8. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
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Citations

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Cited by:
  1. Kaplan, David S., 2009. "Job creation and labor reform in Latin America," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 91-105, March.
  2. Bishwanath Goldar, 2010. "Informalization of Industrial Labour in India: Are labour market rigidities and growing import competition to blame?," Working Papers id:3125, eSocialSciences.
  3. Petia Topalova & Nina Pavcnik & Amit Khandelwal & Penny Goldberg, 2009. "Multi-product Firms and Product Turnover in the Developing World: Evidence from India," 2009 Meeting Papers 176, Society for Economic Dynamics.
  4. Mitra, Arup, 2013. "Can industry be the key to pro-poor growth? : An exploratory analysis for India," ILO Working Papers 484346, International Labour Organization.
  5. Kathuria, Vinish & Rajesh Raj, S.N. & Sen, Kunal, 2013. "The effects of economic reforms on manufacturing dualism: Evidence from India," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1240-1262.
  6. Holzmann, Robert & Pouget, Yann & Vodopivec, Milan & Weber, Michael, 2011. "Severance Pay Programs around the World: History, Rationale, Status, and Reforms," IZA Discussion Papers 5731, Institute for the Study of Labor (IZA).
  7. Reyes Aterido & Mary Hallward-Driemeier & Carmen Pag�s, 2011. "Big Constraints to Small Firms’ Growth? Business Environment and Employment Growth across Firms," Economic Development and Cultural Change, University of Chicago Press, vol. 59(3), pages 609 - 647.
  8. Gallagher, Mary & Giles, John T. & Park, Albert & Wang, Meiyan, 2013. "China's 2008 Labor Contract Law: Implementation and Implications for China's Workers," IZA Discussion Papers 7555, Institute for the Study of Labor (IZA).
  9. Djankov, Simeon & Ramalho, Rita, 2008. "Employment Laws in Developing Countries," CEPR Discussion Papers 7097, C.E.P.R. Discussion Papers.
  10. Josef Montag, 2013. "Is Pro-Labor Law Pro-Women? Evidence from India," CERGE-EI Working Papers wp488, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  11. Banerjee, Abhijit & Bertrand, Marianne & Datta, Saugato & Mullainathan, Sendhil, 2009. "Labor market discrimination in Delhi: Evidence from a field experiment," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 14-27, March.
  12. Ayyagari, Meghana & Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2013. "Size and age of establishments: evidence from developing countries," Policy Research Working Paper Series 6718, The World Bank.
  13. Ghosh, Saibal, 2013. "Do economic reforms matter for manufacturing productivity? Evidence from the Indian experience," Economic Modelling, Elsevier, vol. 31(C), pages 723-733.
  14. Rita Almeida & Pedro Carneiro, Renata Narita, 2013. "Producing Higher Quality Jobs: Enforcement of Mandated Benefits across Brazilian Cities between 1996-2007," Working Papers, Department of Economics 2013_22, University of São Paulo (FEA-USP).

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