Labor regulations and contract labor use: Evidence from Indian firms

Ritam Chaurey

Journal of Development Economics, 2015, vol. 114, issue C, 224-232

Abstract: Labor regulations in India differ by states and apply differently across types of laborers. The most restrictive laws make it harder to fire permanent workers for firms. However, these laws do not apply to workers hired through contractors (contract workers). Using firm-level data from India, I find that compared to firms in flexible labor regulations, those in more restrictive labor regimes hire more contract workers as a response to transitory local demand shocks. I find no differential response in hiring of permanent workers by firms faced with these shocks. This suggests that firms circumvent labor laws by hiring workers indirectly through contractors in the face of economic fluctuations.

Keywords: Firms; India; Labor laws; Contract workers (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (44)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:114:y:2015:i:c:p:224-232

DOI: 10.1016/j.jdeveco.2014.12.008

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