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Labour Market Regulation and Industrial Performance in India--A Critical Review of the Empirical Evidence

Author

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  • Aditya Bhattacharjea

    (Delhi School of Economics)

Abstract

This paper offers a critique of recent empirical studies on the impact of labour regulation on industrial performance in India. It begins with a review of earlier studies that tried to infer the effects on manufacturing employment of amendments to the Industrial Disputes Act (IDA) in 1976 and 1982 that required government permission for layoffs, retrenchments and closures, and shows that the results are ambiguous. It then criticizes the widely-used index of state-level labour regulation devised by Besley and Burgess (2004), and the econometric methodology they use to establish that excessively pro-worker regulation led to poor performance in Indian manufacturing. Several recent studies that have used their index are also surveyed. Finally, the paper reviews other evidence, pointing in a very different direction, on the actual enforcement of labour laws, labour flexibility, and industrial employment. Throughout, attention is paid to the crucial role of judicial interpretation of the IDA, which has been neglected in this literature.

Suggested Citation

  • Aditya Bhattacharjea, 2006. "Labour Market Regulation and Industrial Performance in India--A Critical Review of the Empirical Evidence," Working papers 141, Centre for Development Economics, Delhi School of Economics.
    • Handle: RePEc:cde:cdewps:141
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    India; industrial relations; employment protection laws; job security regulations; labor flexibility.;
    All these keywords.

    JEL classification:

    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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