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Profitability or Industrial Relations: What Explains Manufacturing Performance across Indian States?

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  • Anirban Karak
  • Deepankar Basu

Abstract

This article begins with a critique of the well‐known claim by Besley and Burgess concerning the negative impact of labour regulation on organized sector manufacturing performance in India. In the second part of the article, the authors use a state‐level panel data set for the period 1969–2005 to analyse the relative importance of profitability (rate of profit as a percentage of the total replacement cost of capital stock) and industrial disputes (man‐days lost to all industrial disputes as a percentage of total workers employed) to explain cross‐state variations of manufacturing performance in India's organized sector. Using three different measures of manufacturing performance — net value added, investment and employment — they find that profitability is more significant than industrial disputes in explaining the variation of manufacturing sector performance across Indian states. The findings presented here therefore question the uncritical acceptance of Besley and Burgess's results in the literature on labour regulation.

Suggested Citation

  • Anirban Karak & Deepankar Basu, 2020. "Profitability or Industrial Relations: What Explains Manufacturing Performance across Indian States?," Development and Change, International Institute of Social Studies, vol. 51(3), pages 817-842, May.
    • Handle: RePEc:bla:devchg:v:51:y:2020:i:3:p:817-842
    DOI: 10.1111/dech.12493
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    References listed on IDEAS

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    Cited by:

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    2. Essotanam Mamba & Afi Balaki, 2022. "Effects of trade policies on external trade performances of ECOWAS countries (1996–2017)†," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 30(3), pages 535-566, July.

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