Using manufacturing data for India, this paper studies the economic effects of legal amendments on two types of labor laws: employment protection and labor dispute resolution legislation. We find that laws that increase employment protection or the cost of labor disputes substantially reduce registered sector employment and output. These laws do no seem to benefit workers either, as they do not increase the share of value added that goes to labor. 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. These adverse effects are not alleviated by the widespread and increasing use of contract labor, particularly in regards to employment. Results are robust to an alternative codification of legal amendments suggested by Bhattacharjea (2006).
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number
3394.
Find related papers by JEL classification: J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
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Juan Botero & Simeon Djankov & Rafael Porta & Florencio C. Lopez-De-Silanes, 2004.
"The Regulation of Labor,"
The Quarterly Journal of Economics,
MIT Press, vol. 119(4), pages 1339-1382, November.
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Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Juan Botero, 2003.
"The Regulation of Labor,"
NBER Working Papers
9756, National Bureau of Economic Research, Inc.
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