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Can Labor Regulation Hinder Economic Performance? Evidence from India

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  • Timothy Besley
  • Robin Burgess

Abstract

This paper investigates whether the industrial relations climate in Indian states has affected the pattern of manufacturing growth in the period 1958–1992. We show that states which amended the Industrial Disputes Act in a pro-worker direction experienced lowered output, employment, investment, and productivity in registered or formal manufacturing. In contrast, output in unregistered or informal manufacturing increased. Regulating in a pro-worker direction was also associated with increases in urban poverty. This suggests that attempts to redress the balance of power between capital and labor can end up hurting the poor.

Suggested Citation

  • Timothy Besley & Robin Burgess, 2004. "Can Labor Regulation Hinder Economic Performance? Evidence from India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 91-134.
    • Handle: RePEc:oup:qjecon:v:119:y:2004:i:1:p:91-134.
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    More about this item

    JEL classification:

    • H0 - Public Economics - - General
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • K2 - Law and Economics - - Regulation and Business Law
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • H1 - Public Economics - - Structure and Scope of Government
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy

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