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Trade openness, labour institutions and flexibilisation: theory and evidence from India

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  • Kunal Sen
  • Bibhas Saha
  • Dibyendu Maiti

Abstract

There has been increasing ‘flexibilisation’, in the formal labour markets of both developed and developing countries. Labour institutions and globalisation are often taken to be causally related to this phenomenon, but the evidence remains inconclusive. In India, there has been an increasing use of temporary workers employed through contractors (contract workers), who are not represented by trade unions and who do not fall under the purview of the labour laws that are applicable to directly employed workers (formal workers) in formal labour markets. We develop a model of labour demand where firms choose a mix of contract workers and formal workers, rather than formal workers alone. Then we test the model using state-industry-year panel data for Indian manufacturing from 1998 to 2005. We find that both pro-worker labour institutions and increased import penetration lead to greater use of contract labour in Indian manufacturing.

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File URL: http://www.bwpi.manchester.ac.uk/resources/Working-Papers/bwpi-wp-12310.pdf
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Bibliographic Info

Paper provided by BWPI, The University of Manchester in its series Brooks World Poverty Institute Working Paper Series with number 12310.

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Date of creation: 2010
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Handle: RePEc:bwp:bwppap:12310

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  1. Gabriela Inchauste & Mark Gradstein & Era Dabla-Norris, 2005. "What Causes Firms to Hide Output? The Determinants of Informality," IMF Working Papers 05/160, International Monetary Fund.
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Cited by:
  1. 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.
  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.

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