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Are All Labor Regulations Equal? Evidence from Indian Manufacturing

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  • Ahsan, Ahmad

    (World Bank)

  • Pagés, Carmen

    (Inter-American Development Bank)

Abstract

Using manufacturing data for India, this paper studies the economic effects of legal amendments on two types of labor laws: employment protection and labor dispute resolution legislation. We find that laws that increase employment protection or the cost of labor disputes substantially reduce registered sector employment and output. These laws do no seem to benefit workers either, as they do not increase the share of value added that goes to labor. Labor-intensive industries, such as textiles, are the hardest hit by amendments that increase employment protection while capital-intensive industries are the most affected by laws that increase the cost of labor dispute resolution. These adverse effects are not alleviated by the widespread and increasing use of contract labor, particularly in regards to employment. Results are robust to an alternative codification of legal amendments suggested by Bhattacharjea (2006).

Suggested Citation

  • Ahsan, Ahmad & Pagés, Carmen, 2008. "Are All Labor Regulations Equal? Evidence from Indian Manufacturing," IZA Discussion Papers 3394, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp3394
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    More about this item

    Keywords

    employment protection; labor dispute resolution; contract labor; employment; India;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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