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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 Policy
Link to this Page: www.cepr.org/pubs/dps/DP3260.asp


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.

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