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

  • Bishwanath Goldar
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    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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    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 Evidence from India," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 33, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.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. 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.
    3. Kunal Sen & Bibhas Saha & Dibyendu Maiti, 2010. "Trade openness, labour institutions and flexibilisation: theory and evidence from India," Brooks World Poverty Institute Working Paper Series 12310, BWPI, The University of Manchester.
    4. Dibyendu Maiti & Kunal Sen, 2010. "The Informal Sector in India," Journal of South Asian Development, , vol. 5(1), pages 1-13, April.
    5. Poonam Gupta, 2008. "What Constrains Indian Manufacturing," Working Papers id:1597, eSocialSciences.
    6. Sean Dougherty, 2008. "Labour Regulation and Employment Dynamics at the State Level in India," OECD Economics Department Working Papers 624, OECD Publishing.
    7. Ahsan, Ahmad & Pagés, Carmen, 2008. "Are All Labor Regulations Equal? Evidence from Indian Manufacturing," IZA Discussion Papers 3394, Institute for the Study of Labor (IZA).
    8. S. Mahendra Dev, 2008. "India," Chapters, in: Handbook on the South Asian Economies, chapter 1 Edward Elgar.
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