DP3260 Can Labour Regulation Hinder Economic Performance? Evidence from India

Author(s): Timothy J. Besley, Robin Burgess
Publication Date: March 2002
Keyword(s): industrial relations, labour regulation
JEL(s): H00, H10, I30, J50, K20, L50, L60, O20, O40
Programme Areas: Public Economics
Link to this Page: http://www.cepr.org/pubs/dps/DP3260

This Paper investigates whether the industrial relations climate in Indian states has affected the pattern of manufacturing growth in the period 1958-92. We show that pro-worker amendments to the Industrial Disputes Act are associated with lowered investment, employment, productivity and output in registered manufacturing. Regulating in a pro-worker direction is also associated with increases in urban poverty. This suggests that attempts to redress the balance of power between capital and labour can end up hurting the poor.