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Can labour regulation hinder economic performance? Evidence from India

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  • Besley, Timothy
  • Burgess, Robin

Abstract

This paper investigates whether the industrial relations climate in Indian States has affected the pattern of manufacturing growth in the period 1958-92. We show that pro-worker amendments to the Industrial Disputes Act are associated with lowered investment, employment, productivity and output in registered manufacturing. Regulating in a pro-worker direction is also associated with increases in urban poverty. This suggests that attempts to redress the balance of power between capital and labour can end up hurting the poor.

Suggested Citation

  • Besley, Timothy & Burgess, Robin, 2002. "Can labour regulation hinder economic performance? Evidence from India," LSE Research Online Documents on Economics 3779, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:3779
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    More about this item

    Keywords

    Indian industrial relations; Industrial Disputes Act; manufacturing growth; pro-worker regulations; urban poverty; capital and labour.;
    All these keywords.

    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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