REGULATIONS
N LABOUR-abundant
India, labour-intensive
manufacturing is
concentrated mainly in
small, unorganized
or unregistered
manufacturing rms which are rarely
at the technological frontier, while most
of the production activities within the
formal manufacturing sector are
capital-intensive (Panagariya, 2008
and Kochhar et al, 2006). Thus, despite
its labour abundance and the large size
of its population and economy, India
has a small share of the world market
in labour-intensive products. While
some commentators have put the blame
for this poor performance on Indias
rigid labour markets arising out of its
restrictive labour regulations, others
have argued that Indian businesses have
found ways to get around these laws. In
this article, I examine the role, if any,
of labour regulations in constraining
Indias manufacturing sector and the
possible need for labour reforms, along
with some policy recommendations.
The author is Professor of Economics and Cramer Professor of Global Affairs at the Maxwell School of Citizenship & Public Affairs,
Syracuse University, NY, USA. He is a Fellow of the CESifo network and of the IZA, and also Research Professor at the Ifo Institute in
Munich. He is Co-editor of Economics and Politics, and Associate Editor of the European Economic Review, Journal of Development
Economics, Journal of International Economics, International Review of Economics and Finance and International Journal of Business
and Economics. His research areas are international trade, political economy and development economics, and his current research
interests are at the interface of trade and labor. His work has been published in well-known international economic journals.
35
Readings
Ahsan, Reshad N. and Devashish Mitra,
2014. Trade Liberalization and Labours
Slice of the Pie: Evidence from Indian
Firms, Journal of Development Economics
108, 1-16.
Ahsan, Reshad N., Arghya Ghosh and
Devashish Mitra, 2015. International Trade
and Unionization: Theory and Evidence,
mimeo, Department of Economics, Syracuse
University.
Amirapu, Amrit and Michael Gechter,
2014. Indian Labour Regulations and the
Cost of Corruption: Evidence from the Firm
Size Distribution, mimeo, Department of
Economics, Boston University. Available
at https://drive.google.com/viewerng/
viewer?a=v&pid=sites & srcid=ZGVmYXV
sdGRvbWFpbnxhbXJpdGFtaXJhcHV8Z3g6
NjE3YWRmMjJlOWNhMjg1Nw
Bardhan, Pranab, 2014. The Labour
Reform Myth, Ideas for India, September
14.
Besley, Timothy and Robin Burgess,
2004. "Can Labour Regulation Hinder
Economic Performance? Evidence from
India," Quarterly Journal of Economics
119(1), 91-134.
Bhagwati, Jagdish and ArvindPanagariya,
2013. Why Growth Matters: How Economic
Growth in India Reduced Poverty and the
Lessons for Other Developing Countries,
Public Affairs, New York.
Das, Deb Kusum, DeepikaWadhwa
and GunajitKalita, 2009. The Employment
Potential of Labour Intensive Industries in
Indias Organized Manufacturing, ICRIER
Working Paper 236, June.
Dougherty, Sean, Vernica C. Frisancho
Robles and Kala Krishna, 2011. "Employment
Protection Legislation and Plant-Level
Productivity in India," NBER Working Paper
#17693.
Gupta, Poonam, RanaHasan and Utsav
Kumar, 2008. "Big Reforms but Small
Payoffs: Explaining the Weak Record of
Growth in Indian Manufacturing," India
Policy Forum 5(1), 59-123.
Hasan, Rana and Karl Jandoc,
2013.Labour Regulations and Firm-Size
Distribution in Indian Manufacturing, in
JagdishBhagwati and ArvindPanagariya (eds.)
Reforms and Economic Transformation in
India, Oxford University Press, NewYork,
NY, 15-48.
Hasan, Rana, DevashishMitra and K.V.
Ramaswamy, 2007. Trade Reforms, Labour
Regulations and Labour Demand Elasticities:
Empirical Evidence from India, Review of
Economics & Statistics 89(3), 466-481.
Endnotes
1 See for instance Bardhan (2014) and Amirapu and Gechter (2014). See also Bhagwati
and Panagariya (2013) for a counterargument
to these inferences. The counterargument I
provide in this article is effectively the same
(only explained slightly differently).
(E-mail:dmitra@maxwell.syr.edu)
39