[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/bwp/bwppap/12310.html
   My bibliography  Save this paper

Trade openness, labour institutions and flexibilisation: theory and evidence from India

Author

Listed:
  • Kunal Sen
  • Bibhas Saha
  • Dibyendu Maiti
Abstract
There has been increasing ‘flexibilisation’, in the formal labour markets of both developed and developing countries. Labour institutions and globalisation are often taken to be causally related to this phenomenon, but the evidence remains inconclusive. In India, there has been an increasing use of temporary workers employed through contractors (contract workers), who are not represented by trade unions and who do not fall under the purview of the labour laws that are applicable to directly employed workers (formal workers) in formal labour markets. We develop a model of labour demand where firms choose a mix of contract workers and formal workers, rather than formal workers alone. Then we test the model using state-industry-year panel data for Indian manufacturing from 1998 to 2005. We find that both pro-worker labour institutions and increased import penetration lead to greater use of contract labour in Indian manufacturing.

Suggested Citation

  • Kunal Sen & Bibhas Saha & Dibyendu Maiti, 2010. "Trade openness, labour institutions and flexibilisation: theory and evidence from India," Global Development Institute Working Paper Series 12310, GDI, The University of Manchester.
    • Handle: RePEc:bwp:bwppap:12310
    as

    Download full text from publisher

    File URL: http://hummedia.manchester.ac.uk/institutes/gdi/publications/workingpapers/bwpi/bwpi-wp-12310.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Philippe Aghion & Robin Burgess & Stephen J. Redding & Fabrizio Zilibotti, 2008. "The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India," American Economic Review, American Economic Association, vol. 98(4), pages 1397-1412, September.
    2. Bibhas Saha, 2006. "Labour Institutions in China and India," Journal of South Asian Development, , vol. 1(2), pages 179-205, October.
    3. Giuseppe Bertola, 2004. "A Pure Theory of Job Security and Labour Income Risk," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(1), pages 43-61.
    4. Panagariya, Arvind, 2011. "India: The Emerging Giant," OUP Catalogue, Oxford University Press, number 9780199751563.
    5. Koujianou Goldberg, Pinelopi & Pavcnik, Nina, 2003. "The response of the informal sector to trade liberalization," Journal of Development Economics, Elsevier, vol. 72(2), pages 463-496, December.
    6. World Bank, 2007. "India - Land Policies for Growth and Poverty Reduction," World Bank Publications - Reports 7818, The World Bank Group.
    7. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
    8. Timothy Besley & Robin Burgess, 2004. "Can Labor Regulation Hinder Economic Performance? Evidence from India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 91-134.
    9. Booth, Alison L & Chatterji, Monojit, 1998. "Unions and Efficient Training," Economic Journal, Royal Economic Society, vol. 108(447), pages 328-343, March.
    10. Dabla-Norris, Era & Gradstein, Mark & Inchauste, Gabriela, 2008. "What causes firms to hide output? The determinants of informality," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 1-27, February.
    11. Sean M. Dougherty, 2009. "Labour Regulation and Employment Dynamics at the State Level in India," Review of Market Integration, India Development Foundation, vol. 1(3), pages 295-337, December.
    12. Djankov, Simeon & Ramalho, Rita, 2009. "Employment laws in developing countries," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 3-13, March.
    13. Calì, Massimiliano & Sen, Kunal, 2011. "Do Effective State Business Relations Matter for Economic Growth? Evidence from Indian States," World Development, Elsevier, vol. 39(9), pages 1542-1557, September.
    14. David H. Autor, 2003. "Outsourcing at Will: The Contribution of Unjust Dismissal Doctrine to the Growth of Employment Outsourcing," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 1-42, January.
    15. Rana Hasan & Devashish Mitra & K.V. Ramaswamy, 2007. "Trade Reforms, Labor Regulations, and Labor-Demand Elasticities: Empirical Evidence from India," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 466-481, August.
    16. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
    17. World Bank, 2007. "India : Land Policies for Growth and Poverty Reduction," World Bank Publications - Books, The World Bank Group, number 15791.
    18. Ulyssea, Gabriel, 2010. "Regulation of entry, labor market institutions and the informal sector," Journal of Development Economics, Elsevier, vol. 91(1), pages 87-99, January.
    19. Grout, Paul A, 1984. "Investment and Wages in the Absence of Binding Contracts: A Nash Bargining Approach," Econometrica, Econometric Society, vol. 52(2), pages 449-460, March.
    20. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-690, September.
    21. Lindbeck, Assar & Snower, Dennis J, 1986. "Wage Setting, Unemployment, and Insider-Outsider Relations," American Economic Review, American Economic Association, vol. 76(2), pages 235-239, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kathuria, Vinish & Rajesh Raj, S.N. & Sen, Kunal, 2013. "The effects of economic reforms on manufacturing dualism: Evidence from India," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1240-1262.
    2. Amrit Amirapu & Michael Gechter, 2020. "Labor Regulations and the Cost of Corruption: Evidence from the Indian Firm Size Distribution," The Review of Economics and Statistics, MIT Press, vol. 102(1), pages 34-48, March.
    3. Bhaskar Jyoti Neog & Bimal Kishore Sahoo, 2020. "Job Reallocation Dynamics in India: Evidence from Large Manufacturing Plants," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(4), pages 934-959, August.
    4. Ayyagari, Meghana & Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2014. "Does local financial development matter for firm lifecycle in India ?," Policy Research Working Paper Series 7008, The World Bank.
    5. Nihar Shembavnekar, 2015. "Tariff Liberalisation, Labour Market Flexibility and Employment: Evidence from India," Working Paper Series 8115, Department of Economics, University of Sussex Business School.
    6. Marijn A. Bolhuis & Swapnika R. Rachapalli & Diego Restuccia, 2021. "Misallocation in Indian Agriculture," NBER Working Papers 29363, National Bureau of Economic Research, Inc.
    7. Sonja Fagernäs, 2010. "Labor Law, Judicial Efficiency, and Informal Employment in India," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 7(2), pages 282-321, June.
    8. Djankov, Simeon & Ramalho, Rita, 2009. "Employment laws in developing countries," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 3-13, March.
    9. MacLeod, W. Bentley, 2011. "Great Expectations: Law, Employment Contracts, and Labor Market Performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 18, pages 1591-1696, Elsevier.
    10. Nihar Shembavnekar, 2019. "Economic Reforms, Labour Markets and Formal Sector Employment: Evidence from India," Economies, MDPI, vol. 7(2), pages 1-42, April.
    11. Sofi Irfan Ahmad & Sharma Pritee, 2015. "Labour Laws and Informalisation of Employment: Panel Evidences from Indian Formal Manufacturing Sector," Asian Journal of Law and Economics, De Gruyter, vol. 6(1), pages 65-84, April.
    12. Dibyendu Maiti & Poulomi Dasgupta & Anusree Paul, 2014. "Productivity and Elasticity Differential between Direct and Contract Workers in Indian Manufacturing Sector," Review of Market Integration, India Development Foundation, vol. 6(2), pages 236-260, August.
    13. Meghana Ayyagari & Asli Demirguc-Kunt & Vojislav Maksimovic, 2017. "What Determines Entrepreneurial Outcomes in Emerging Markets? The Role of Initial Conditions," The Review of Financial Studies, Society for Financial Studies, vol. 30(7), pages 2478-2522.
    14. Rajeev Dehejia & Arvind Panagariya, 2016. "The Link between Manufacturing Growth and Accelerated Services Growth in India," Economic Development and Cultural Change, University of Chicago Press, vol. 64(2), pages 221-264.
    15. Calì, Massimiliano & Sen, Kunal, 2011. "Do Effective State Business Relations Matter for Economic Growth? Evidence from Indian States," World Development, Elsevier, vol. 39(9), pages 1542-1557, September.
    16. Asha Sundaram, 2015. "The Impact of Trade Liberalization on Micro Enterprises: Do Banks Matter? Evidence from Indian Manufacturing," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 77(6), pages 832-853, December.
    17. Ashok Kotwal & Bharat Ramaswami & Wilima Wadhwa, 2011. "Economic Liberalization and Indian Economic Growth: What's the Evidence?," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 1152-1199, December.
    18. Chakraborty, Pavel & Mitra, Devashish & Sundaram, Asha, 2024. "Import competition, labor market regulations, and firm outsourcing," Journal of Development Economics, Elsevier, vol. 168(C).
    19. Almeida, Rita K. & Poole, Jennifer P., 2017. "Trade and labor reallocation with heterogeneous enforcement of labor regulations," Journal of Development Economics, Elsevier, vol. 126(C), pages 154-166.
    20. Hasan, Rana & Mehta, Aashish & Sundaram, Asha, 2021. "The effects of labor regulation on firms and exports: Evidence from Indian apparel manufacturing," Journal of Comparative Economics, Elsevier, vol. 49(1), pages 183-200.

    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bwp:bwppap:12310. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Rowena Harding (email available below). General contact details of provider: https://edirc.repec.org/data/wpmanuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.