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

Aditya Bhattacharjea ()

No 141, Working papers from Centre for Development Economics, 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.

Keywords: India; industrial relations; employment protection laws; job security regulations; labor flexibility. (search for similar items in EconPapers)
JEL-codes: J53 J68 O53 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2006-06
New Economics Papers: this item is included in nep-cwa, nep-dev, nep-lab and nep-reg
References: View references in EconPapers View complete reference list from CitEc
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