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Labor Disputes and the Economics of Firm Geography: A Study of Domestic Investment in India

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  • Sanyal, Paroma
  • Menon, Nidhiya

Abstract

Acrimonious relations between employers and employees in developing countries have often been cited as impediments to progress. This article considers various measures of labor disputes and investigates whether these have detrimental effects on the location choice of new domestic investment across the various states of India. Conventional wisdom holds that an increase in measures such as the number of strikes, the number of man-days lost in work stoppages, and the percentage of unionized workers would hinder the location of new projects. Using panel data and a fixed-effects methodology that controls for the effect of state-specific unobservables, we find significant evidence that this is indeed the case in India. Furthermore, disaggregation by industrial classifications shows that, although labor disputes continue to exert negative effects, location choices are also conditioned on factors such as proximity to raw materials and minerals.

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  • Sanyal, Paroma & Menon, Nidhiya, 2005. "Labor Disputes and the Economics of Firm Geography: A Study of Domestic Investment in India," Economic Development and Cultural Change, University of Chicago Press, vol. 53(4), pages 825-854, July.
    • Handle: RePEc:ucp:ecdecc:y:2005:v:53:i:4:p:825-54
    DOI: 10.1086/429304
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    Cited by:

    1. Nidhiya Menon, 2010. "Obstacles to Business, Technology Use, and Firms with Female Principal Owners in Kenya," Working Papers 20, Brandeis University, Department of Economics and International Business School.
    2. Reece, Christopher & Sam, Abdoul G., 2012. "Impact of Pension Privatization on Foreign Direct Investment," World Development, Elsevier, vol. 40(2), pages 291-302.
    3. Philippe Aghion & Robin Burgess & Stephen J. Redding & Fabrizio Zilibotti, 2008. "The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India," American Economic Review, American Economic Association, vol. 98(4), pages 1397-1412, September.
    4. Sam, Abdoul G., 2009. "Impact of Government-Sponsored Pollution Prevention Practices on Environmental Compliance and Enforcement: Evidence from a Sample of US Manufacturing Facilities," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49306, Agricultural and Applied Economics Association.
    5. Yana van der Meulen Rodgers & Nidhiya Menon, 2013. "Labor Regulations and Job Quality: Evidence from India," ILR Review, Cornell University, ILR School, vol. 66(4), pages 933-957, July.
    6. Abdoul Sam, 2010. "Impact of government-sponsored pollution prevention practices on environmental compliance and enforcement: evidence from a sample of US manufacturing facilities," Journal of Regulatory Economics, Springer, vol. 37(3), pages 266-286, June.
    7. Sonja Fagernäs, 2010. "Labor Law, Judicial Efficiency, and Informal Employment in India," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 7(2), pages 282-321, June.
    8. Petia Topalova, 2010. "Factor Immobility and Regional Impacts of Trade Liberalization: Evidence on Poverty from India," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 1-41, October.
    9. Djankov, Simeon & Ramalho, Rita, 2009. "Employment laws in developing countries," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 3-13, March.
    10. Nidhiya Menon, 2015. "Gender And Technology Use In Developing Countries: Evidence From Firms In Kenya," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 40(3), pages 105-140, September.
    11. Duanmu, Jing-Lin, 2014. "A race to lower standards? Labor standards and location choice of outward FDI from the BRIC countries," International Business Review, Elsevier, vol. 23(3), pages 620-634.
    12. Nidhiya Menon, 2010. "Got Technology? The Impact of Computers and Cell-phones on Productivity in a Difficult Business Climate: Evidence from Firms with Female Owners in Kenya," Working Papers 21, Brandeis University, Department of Economics and International Business School.
    13. Saibal Ghosh, 2009. "Industry Effects of Monetary Policy: Evidence from India," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 44(1), pages 89-105, July.
    14. Swapan Chakraborty, 2021. "Labour Market Regulation and Manufacturing Employment: A Study of Organized Manufacturing Sector Across Indian States," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 64(1), pages 1-22, March.
    15. Anirban Karak & Deepankar Basu, 2017. "Profitability or Industrial Relations : What Explains Manufacturing Performance Across Indian States?," UMASS Amherst Economics Working Papers 2017-01, University of Massachusetts Amherst, Department of Economics.
    16. Ghosh, Saibal, 2007. "Economic Geography of Industrial Location: Evidence from Indian States," MPRA Paper 22441, University Library of Munich, Germany.
    17. Diti Goswami & Sourabh Bikas Paul, 2020. "Labor Reforms in Rajasthan: A boon or a bane?," Papers 2012.01016, arXiv.org.
    18. Aditya Bhattacharjea, 2006. "Labour Market Regulation and Industrial Performance in India--A Critical Review of the Empirical Evidence," Working papers 141, Centre for Development Economics, Delhi School of Economics.
    19. Nitin Gupta, 2011. "The Differential Effects of Financial Development on India's Industrial Performance," ASARC Working Papers 2011-12, The Australian National University, Australia South Asia Research Centre.
    20. Nidhiya Menon & Paroma Sanyal, 2007. "Labor Conflict and Foreign Investments: An Analysis of FDI in India," Review of Development Economics, Wiley Blackwell, vol. 11(4), pages 629-644, November.
    21. Sean M. Dougherty, 2009. "Labour Regulation and Employment Dynamics at the State Level in India," Review of Market Integration, India Development Foundation, vol. 1(3), pages 295-337, December.
    22. Ghosh, Saibal, 2013. "Do economic reforms matter for manufacturing productivity? Evidence from the Indian experience," Economic Modelling, Elsevier, vol. 31(C), pages 723-733.

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