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Labor Regulations and Plant Location Choice: Evidence From India

Author

Listed:
  • Paroma Sanyal

    (Brandeis University)

  • Nidhiya Menon

    (Brandeis University)

Abstract

Certain regulations in developing countries have often been cited as impediments to progress. This paper considers one facet of these regulations - labor laws - and investigates whether these have detrimental effects on firm location and investment decisions. Conventional wisdom holds that pro-worker labor regulations within a state would hinder firm location in that state. We fine strong evidence that this is indeed the case, and our results are robust to alternative specifications. Furthermore, disaggregation by industrial classifications shows that although labor regulations continue to exert negative effects, location choices are also conditioned on other factors such as proximity to raw materials and minerals.

Suggested Citation

  • Paroma Sanyal & Nidhiya Menon, 2004. "Labor Regulations and Plant Location Choice: Evidence From India," Industrial Organization 0403007, EconWPA.
  • Handle: RePEc:wpa:wuwpio:0403007 Note: Type of Document - pdf; pages: 37. 37 pages, pdf document.
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    File URL: http://econwpa.repec.org/eps/io/papers/0403/0403007.pdf
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    References listed on IDEAS

    as
    1. Bartik, Timothy J, 1985. "Business Location Decisions in the United States: Estimates of the Effects of Unionization, Taxes, and Other Characteristics of States," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(1), pages 14-22, January.
    2. Timothy Besley & Robin Burgess, 2004. "Can Labor Regulation Hinder Economic Performance? Evidence from India," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 91-134.
    3. Dean, Thomas J. & Brown, Robert L. & Stango, Victor, 2000. "Environmental Regulation as a Barrier to the Formation of Small Manufacturing Establishments: A Longitudinal Examination," Journal of Environmental Economics and Management, Elsevier, vol. 40(1), pages 56-75, July.
    4. Arora, Seema & Cason, Timothy, 1996. "Do Community Characteristics Determine Environmental Outcomes? Evidence from the Toxics Release Inventory," Discussion Papers dp-97-12, Resources For the Future.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Labor regulations; location choice; India;

    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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