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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.

Suggested Citation

  • Kunal Sen & Bibhas Saha & Dibyendu Maiti, 2010. "Trade openness, labour institutions and flexibilisation: theory and evidence from India," Global Development Institute Working Paper Series 12310, GDI, The University of Manchester.
  • Handle: RePEc:bwp:bwppap:12310
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    References listed on IDEAS

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    Cited by:

    1. Pal, Rupayan & Rathore, Udayan, 2016. "Estimating workers’ bargaining power and firms’ markup in India: Implications of reforms and labour regulations," Journal of Policy Modeling, Elsevier, vol. 38(6), pages 1118-1135.
    2. 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.
    3. repec:eee:jeborg:v:137:y:2017:i:c:p:90-104 is not listed on IDEAS
    4. repec:ilo:ilowps:488132 is not listed on IDEAS
    5. 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.
    6. Matthew Embrey & Guillaume R. Frechette & Sevgi Yuksel, 2016. "Cooperation in the Finitely Repeated Prisoner's Dilemma," Working Paper Series 8616, Department of Economics, University of Sussex.
    7. Goldar, Bishwanath. & Sadhukhan, Amit., 2015. "Employment and wages in Indian manufacturing : post-reform performance," ILO Working Papers 994881323402676, International Labour Organization.
    8. Chaurey, Ritam, 2015. "Labor regulations and contract labor use: Evidence from Indian firms," Journal of Development Economics, Elsevier, vol. 114(C), pages 224-232.
    9. Purna Banerjee & C. Veeramani, 2015. "Trade Liberalisation and Women’s Employment Intensity: Analysis of India’s Manufacturing," Working Papers id:7044, eSocialSciences.
    10. Srivastava, Ravi., 2016. "Structural change and non-standard forms of employment in India," ILO Working Papers 994897513402676, International Labour Organization.
    11. Nihar Shembavnekar, 2015. "Tariff Liberalisation, Labour Market Flexibility and Employment: Evidence from India," Working Paper Series 8115, Department of Economics, University of Sussex.
    12. Sofi Irfan Ahmad & Sharma Pritee, 2015. "Labour Laws and Informalisation of Employment: Panel Evidences from Indian Formal Manufacturing Sector," Asian Journal of Law and Economics, De Gruyter, vol. 6(1), pages 65-84, April.
    13. repec:spr:ijlaec:v:60:y:2017:i:2:d:10.1007_s41027-017-0097-9 is not listed on IDEAS
    14. Ghosh Dastidar, Sayantan, 2015. "Manufacturing and Trade Liberalisation of India: Continuing the Debate," MPRA Paper 61907, University Library of Munich, Germany.
    15. Purna Banerjee & C. Veeramani, 2015. "Trade liberalisation and women's employment intensity: Analysis of India's manufacturing industries," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2015-018, Indira Gandhi Institute of Development Research, Mumbai, India.
    16. 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.
    17. Rashid, Amjad, 2012. "Generating Decent Work:How labour market institutions matter," MPRA Paper 60072, University Library of Munich, Germany, revised Jan 2013.

    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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