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Regulation and noncompliance : magnitudes and patterns for India's factories act

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  • Chatterjee, Urmila
  • Kanbur, Ravi

Abstract

Noncompliance with regulations by enterprises is said to be rife in developing countries. Yet there is limited systematic evidence of the magnitude of noncompliance at the enterprise level. Making innovative use of two complementary data sources, this paper quantifies noncompliance for India's Factories Act without the question of illegality ever being raised directly with enterprises. The paper finds that more than twice as many firms are not complying as are complying. Further, the number of noncompliant firms is much larger than the number of firms adjusting out of the regulation. Thus noncompliance with the Factories Act is a key feature of the"missing middle"in India. The paper explores the main trends and patterns of noncompliance and highlights a number of key issues for further analytical and policy research.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6755.

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Date of creation: 01 Jan 2014
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Handle: RePEc:wbk:wbrwps:6755

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Keywords: Microfinance; Regulatory Regimes; Labor Markets; Labor Policies; Small Scale Enterprise;

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  1. Ravi KANBUR & Lucas RONCONI & Leigh WEDENOJA, 2013. "Labour law violations in Chile," International Labour Review, International Labour Organization, International Labour Organization, vol. 152(3-4), pages 431-444, December.
  2. Bhorat, Haroon & Kanbur, Ravi & Mayet, Natasha, 2011. "Minimum Wage Violation In South Africa," Working Papers, Cornell University, Department of Applied Economics and Management 126534, Cornell University, Department of Applied Economics and Management.
  3. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, National Bureau of Economic Research, Inc, in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
  4. Aureo de Paula & Jose A. Scheinkman, 2006. "The Informal Sector," Levine's Bibliography 122247000000001030, UCLA Department of Economics.
  5. Ashenfelter, Orley & Smith, Robert S, 1979. "Compliance with the Minimum Wage Law," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(2), pages 333-50, April.
  6. Bedi, Jatinder S., 2007. "Discrepancies and validation of Indian manufacturing data," MPRA Paper 43036, University Library of Munich, Germany.
  7. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, Elsevier, vol. 1(3-4), pages 323-338, November.
  8. Lucas Ronconi, 2010. "Enforcement and Compliance with Labor Regulations," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 63(4), pages 719-736, July.
  9. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
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