IDEAS home Printed from https://ideas.repec.org/a/nca/ncaerj/v10y2014i2014-1p1-56.html
   My bibliography  Save this article

State-level Labor Reform and Firm-level Productivity in India

Author

Listed:
  • Sean, Dougherty
  • Veronica, Frisancho
  • Kala, Krishna

Abstract

We examine the effects of labor market reform on establishment performance in different Indian states over a contemporaneous period. Using plant-level data for a period from the late 1990s to the late 2000s, the study provides plant-level cross-state/time-series evidence of the impact of reforms of employment protection legislation and related labor market policies on productivity in India. Identification of the effect of employment protection legislation follows from a difference-indifferences estimator inspired by Rajan and Zingales (1998) that takes advantage of the state-level variation in labor regulation and heterogeneous industry characteristics. The fundamental identification assumption is that employment protection legislation is more likely to restrict firms operating in industries with higher labor intensity and/or higher sales volatility. The results show that firms in labor intensive or more volatile industries benefited the most from labor reforms in their states. Point estimates indicate that, on average, firms in labor intensive industries and in flexible labor markets have total factor productivity residuals 25.4% higher than those registered for their counterparts in states with more stringent labor laws.

Suggested Citation

  • Sean, Dougherty & Veronica, Frisancho & Kala, Krishna, 2014. "State-level Labor Reform and Firm-level Productivity in India," India Policy Forum, National Council of Applied Economic Research, vol. 10(1), pages 1-56.
    • Handle: RePEc:nca:ncaerj:v:10:y:2014:i:2014-1:p:1-56
    as

    Download full text from publisher

    File URL: https://www.ncaer.org/publication/india-policy-forum-2013-14
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Amrit Amirapu & Michael Gechter, 2020. "Labor Regulations and the Cost of Corruption: Evidence from the Indian Firm Size Distribution," The Review of Economics and Statistics, MIT Press, vol. 102(1), pages 34-48, March.
    2. Veeramani, Choorikkad & Banerjee, Purna, 2022. "Exchange rate fluctuations, labour laws, and gender differences in job flows: Analysis of manufacturing industries across Indian states," World Development, Elsevier, vol. 152(C).
    3. Gopal Krishna Roy & Amaresh Dubey & Suresh Ramaiah, 2020. "Labour Market Flexibility and Changes in Employment: Spatial and Temporal Evidence from Indian Manufacturing," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 63(1), pages 81-98, March.
    4. Sher Singh Verick, 2016. "Manufacturing and jobs: is India different?," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 59(1), pages 57-84, March.
    5. Sher Singh Verick, 2017. "The puzzles and contradictions of the Indian labour market: What will the future of work look like?," ASARC Working Papers 2017-02, The Australian National University, Australia South Asia Research Centre.
    6. Choutagunta Abishek S., 2019. "Effects of Labour Regulation on Manufacturing Firms in India: A Leximetric Approach," Asian Journal of Law and Economics, De Gruyter, vol. 10(1), pages 1-15, April.
    7. Daniel Schwab, 2019. "Labor protection laws and the drain on productivity: Evidence from India," Working Papers 1906, College of the Holy Cross, Department of Economics.
    8. Gopal Krishna Roy & Amaresh Dubey, 2022. "A Note on Industrial Relations Code, 2020," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 65(2), pages 533-543, June.
    9. Daniel Schwab, 2020. "Labor protection laws and the drain on productivity: Evidence from India," Review of Development Economics, Wiley Blackwell, vol. 24(2), pages 383-401, May.
    10. Sofi Irfan Ahmad & Khan Mohd Imran & Kunroo Mohd Hussain & Khachoo Abdul Qayoom, 2016. "Labour Market Regulations and In-formalisation of Migrant Worker: Evidence from Indian Manufacturing Sector," Asian Journal of Law and Economics, De Gruyter, vol. 7(2), pages 169-195, August.
    11. Radhicka Kapoor & P. P. Krishnapriya, 2019. "Explaining the contractualisation of India’s workforce," Working Papers id:12998, eSocialSciences.

    More about this item

    Keywords

    Employment Regulation Legislation; Labor Laws; Job Protection; Total Factor Productivity; Firm-Level Volatility;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • J8 - Labor and Demographic Economics - - Labor Standards
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nca:ncaerj:v:10:y:2014:i:2014-1:p:1-56. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: B Ramesh (email available below). General contact details of provider: https://edirc.repec.org/data/ncaerin.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.