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Indian Labour Law and its Impact on Unemployment, 1970-2006: A leximetric study

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  • Deakin, S.
  • Sarkar, P.

Abstract

We analyse a recently developed leximetric dataset on Indian labour law over the period 1970 to 2006. Indian labour law is seen to be highly protective of workers' interests by international standards, particularly in the area of dismissal regulation. We undertake a time-series econometric analysis to estimate the impact of the strengthening of labour laws on unemployment and industrial output in the formal economy. We find no evidence that pro-worker labour legislation leads to unemployment or industrial stagnation. Rather, pro-worker labour laws are associated with low unemployment, with the direction of causality running from unemployment and output to labour regulation.

Suggested Citation

  • Deakin, S. & Sarkar, P., 2011. "Indian Labour Law and its Impact on Unemployment, 1970-2006: A leximetric study," Working Papers wp428, Centre for Business Research, University of Cambridge.
    • Handle: RePEc:cbr:cbrwps:wp428
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    18. John Armour & Simon Deakin & Priya Lele & Mathias Siems, 2009. "How Do Legal Rules Evolve? Evidence from a cross-country Comparison of Shareholder, Creditor and Worker Protection," Working Papers wp382, Centre for Business Research, University of Cambridge.
    19. Simon Deakin & Prabirjit Sarkar, 2008. "Assessing the Long-Run Economic Impact of Labour Law Systems: A theoretical Reappraisal and Analysis of New Time Series Data," Working Papers wp367, Centre for Business Research, University of Cambridge.
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    Cited by:

    1. Simon Deakin, 2016. "The Contribution of Labour Law to Economic Development & Growth," Working Papers wp478, Centre for Business Research, University of Cambridge.
    2. Zoe Adams & Louise Bishop & Simon Deakin & Colin Fenwick & Sara Martinsson Garzelli & Giudy Rusconi & Centre for Business Research, 2018. "The Economic Significance of Laws Relating to Employment Protection & Different Forms of Employment: Analysis of a Panel of 117 Countries, 1990-2013," Working Papers wp500, Centre for Business Research, University of Cambridge.
    3. Masahiro Kawai & Henrik Schmiegelow, 2013. "Financial Crisis as a Catalyst of Legal Reforms : The Case of Asia," Governance Working Papers 23852, East Asian Bureau of Economic Research.
    4. 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.
    5. 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.
    6. K. R. Shyam Sundar, 2017. "A different reforms agenda: Reform of trade unions!," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 60(2), pages 233-252, June.
    7. Sarkar, Prabirjit, 2011. "Does employment protection lead to unemployment? A panel data analysis of OECD countries, 1990-2008," MPRA Paper 35547, University Library of Munich, Germany.
    8. Zoe Adams & Parisa Bastani & Louise Bishop & Simon Deakin, 2017. "The CBR-LRI Dataset: Methods, Properties & Potential of Leximetric Coding of Labour Laws," Working Papers wp489, Centre for Business Research, University of Cambridge.
    9. Simon Deakin & Shelley Marshall & Sanjay Pinto, 2020. "Labour Laws, Informality, and Development: Comparing India and China," Working Papers wp518, Centre for Business Research, University of Cambridge.
    10. Simon Deakin, 2014. "Labour Law and Inclusive Development," Working Papers wp458, Centre for Business Research, University of Cambridge.
    11. Suzanne Kingston & Zizhen Wang & Edwin Alblas & Micheál Callaghan & Julie Foulon & Valesca Lima & Geraldine Murphy, 2022. "The democratisation of European nature governance 1992–2015: introducing the comparative nature governance index," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 22(1), pages 27-48, March.
    12. Diti Goswami & Sourabh Bikas Paul, 2020. "Labor Reforms in Rajasthan: A boon or a bane?," Papers 2012.01016, arXiv.org.
    13. Keshab Das, 2017. "Labour market resilience in India: conceptual and policy issues," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 60(2), pages 155-174, June.
    14. Simon Deakin & Colin Fenwick & Prabirjit Sarkar, 2013. "Labour Law & Inclusive Development: the Economic Effects of Industrial Relations Laws in Middle-Income Countries," Working Papers wp447, Centre for Business Research, University of Cambridge.
    15. Simon Deakin & Antara Haldar, 2015. "How Should India Reforms Its Labour Laws?," Working Papers wp469, Centre for Business Research, University of Cambridge.
    16. Sean COONEY, 2022. "Legal segmentation in China, India, Malaysia and Viet Nam," International Labour Review, International Labour Organization, vol. 161(4), pages 573-591, December.
    17. Prateek Kukreja & Seema Bathla, 2018. "Labour Regulations and Informalisation in India’s Organised Manufacturing: A Case of Textile and Clothing," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 61(3), pages 473-492, September.
    18. Simon Deakin, 2018. "The Use of Quantitative Methods in Labour Law Research: An Assessment and Reformulation," Working Papers wp495, Centre for Business Research, University of Cambridge.
    19. Irfan Ahmad SOFI & Mohd Hussain KUNROO, 2018. "Demand shocks and employment adjustments: Does employment protection legislation create rigidity?," International Labour Review, International Labour Organization, vol. 157(3), pages 461-480, September.

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    More about this item

    Keywords

    slabour law; unemployment; India;
    All these keywords.

    JEL classification:

    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • J83 - Labor and Demographic Economics - - Labor Standards - - - Workers' Rights

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