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Informalization of Industrial Labour in India: Are labour market rigidities and growing import competition to blame?

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  • Bishwanath Goldar
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    Abstract

    Since the 1980s, there has been increasing informalization of industrial labour in India. It has taken two forms: rising share of the unorganized sector in manufacturing employment and informalization of the organized manufacturing sector itself through subcontracting and use of temporary and contract workers. The paper investigates whether and how far labour market rigidities and increasing import competition are responsible for the increasing informalization on industrial labour in India. An econometric model is estimated for this purpose using unit level data of the NSS 61st round employment-unemployment survey for 2004-05. The estimated model explains the casual worker – regular worker dichotomy in manufacturing. The results show that labour market reforms tend to increase the creation of regular jobs, while import competition tends to raise casual employment among workers with education above primary. The results also show that education enhances the probability of getting a regular job.

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    Paper provided by eSocialSciences in its series Working Papers with number id:3125.

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    Date of creation: Nov 2010
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    Handle: RePEc:ess:wpaper:id:3125
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    Keywords: informalistion of industrial labour; informalisation; manufacturing sector; labour market; labour market rigidities; import competition; worker dichotomy; employment; casual employment; education; Labour Studie; Labour Economics; IASSI conference;

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    1. Timothy Besley & Robin Burgess, 2002. "Can Labour Regulation Hinder Economic Performance? Evidence from India," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 33, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    2. Poonam Gupta & Rana Hasan & Utsav Kumar, 2008. "What Constrains Indian Manufacturing?," Macroeconomics Working Papers 22162, East Asian Bureau of Economic Research.
    3. Arup Mitra & Dibyendu Maiti, 2016. "Skills, Informality, and Development," Working Papers id:8682, eSocialSciences.
    4. Sean Dougherty, 2008. "Labour Regulation and Employment Dynamics at the State Level in India," OECD Economics Department Working Papers 624, OECD Publishing.
    5. Aditya Bhattacharjea, 2006. "Labour Market Regulation and Industrial Performance in India--A Critical Review of the Empirical Evidence," Working papers 141, Centre for Development Economics, Delhi School of Economics.
    6. Ahsan, Ahmad & Pagés, Carmen, 2009. "Are all labor regulations equal? Evidence from Indian manufacturing," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 62-75, March.
    7. Dibyendu Maiti & Kunal Sen, 2010. "The Informal Sector in India," Journal of South Asian Development, SAGE Publishing, vol. 5(1), pages 1-13, April.
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