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Labor regulations and contract labor use: Evidence from Indian firms

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  • Chaurey, Ritam

Abstract

Labor regulations in India differ by states and apply differently across types of laborers. The most restrictive laws make it harder to fire permanent workers for firms. However, these laws do not apply to workers hired through contractors (contract workers). Using firm-level data from India, I find that compared to firms in flexible labor regulations, those in more restrictive labor regimes hire more contract workers as a response to transitory local demand shocks. I find no differential response in hiring of permanent workers by firms faced with these shocks. This suggests that firms circumvent labor laws by hiring workers indirectly through contractors in the face of economic fluctuations.

Suggested Citation

  • Chaurey, Ritam, 2015. "Labor regulations and contract labor use: Evidence from Indian firms," Journal of Development Economics, Elsevier, vol. 114(C), pages 224-232.
  • Handle: RePEc:eee:deveco:v:114:y:2015:i:c:p:224-232
    DOI: 10.1016/j.jdeveco.2014.12.008
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    Cited by:

    1. repec:eee:inecon:v:111:y:2018:i:c:p:159-176 is not listed on IDEAS
    2. Daniel Schwab, 2016. "Employment Protection and the Labor Informality of the Youth: Evidence from India," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-280, Boston University - Department of Economics.
    3. repec:bla:rdevec:v:21:y:2017:i:4:p:1229-1254 is not listed on IDEAS
    4. Ravi S. Srivastava, 2016. "Myth and reality of labour flexibility in India," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 59(1), pages 1-38, March.
    5. Arun Jaitley, 2016. "Economic Survey 2015-16-Volume II," Working Papers id:9912, eSocialSciences.
    6. Sofi Irfan Ahmad & Khachoo Abdul Qayoom & Khan Mohd Imran & Kunroo Mohd Hussain, 2016. "Labour Market Regulations and In-formalisation of Migrant Worker: Evidence from Indian Manufacturing Sector," Asian Journal of Law and Economics, De Gruyter, vol. 7(2), pages 169-195, August.
    7. Arun Jaitley, 2016. "Economic Survey 2015-16-Volume I," Working Papers id:9911, eSocialSciences.

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    Keywords

    Firms; India; Labor laws; Contract workers;

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