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Regulation and noncompliance : magnitudes and patterns for India's factories act

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  • Chatterjee, Urmila
  • Kanbur, Ravi

Abstract

Noncompliance with regulations by enterprises is said to be rife in developing countries. Yet there is limited systematic evidence of the magnitude of noncompliance at the enterprise level. Making innovative use of two complementary data sources, this paper quantifies noncompliance for India's Factories Act without the question of illegality ever being raised directly with enterprises. The paper finds that more than twice as many firms are not complying as are complying. Further, the number of noncompliant firms is much larger than the number of firms adjusting out of the regulation. Thus noncompliance with the Factories Act is a key feature of the"missing middle"in India. The paper explores the main trends and patterns of noncompliance and highlights a number of key issues for further analytical and policy research.

Suggested Citation

  • Chatterjee, Urmila & Kanbur, Ravi, 2014. "Regulation and noncompliance : magnitudes and patterns for India's factories act," Policy Research Working Paper Series 6755, The World Bank.
    • Handle: RePEc:wbk:wbrwps:6755
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    References listed on IDEAS

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    1. Lucas Ronconi, 2010. "Enforcement and Compliance with Labor Regulations in Argentina," ILR Review, Cornell University, ILR School, vol. 63(4), pages 719-736, July.
    2. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54, National Bureau of Economic Research, Inc.
    3. Ravi KANBUR & Lucas RONCONI & Leigh WEDENOJA, 2013. "Labour law violations in Chile," International Labour Review, International Labour Organization, vol. 152(3-4), pages 431-444, December.
    4. Haroon BHORAT & Ravi KANBUR & Natasha MAYET, 2012. "Minimum wage violation in South Africa," International Labour Review, International Labour Organization, vol. 151(3), pages 277-287, September.
    5. Ashenfelter, Orley & Smith, Robert S, 1979. "Compliance with the Minimum Wage Law," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 333-350, April.
    6. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
    7. Aureo de Paula & Jose A. Scheinkman, 2006. "The Informal Sector," Levine's Bibliography 122247000000001030, UCLA Department of Economics.
    8. Bedi, Jatinder S., 2007. "Discrepancies and validation of Indian manufacturing data," MPRA Paper 43036, University Library of Munich, Germany.
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    Cited by:

    1. Ravi Kanbur, 2017. "Informality: Causes, consequences and policy responses," Review of Development Economics, Wiley Blackwell, vol. 21(4), pages 939-961, November.
    2. Rana Hasan & Nidhi Kapoor & Aashish Mehta & Asha Sundaram, 2017. "Labor Regulations, Employment and Wages: Evidence from India's Apparel Sector," Asian Economic Policy Review, Japan Center for Economic Research, vol. 12(1), pages 70-90, January.

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    Keywords

    Microfinance; Regulatory Regimes; Labor Markets; Labor Policies; Small Scale Enterprise;
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