DP3260 | Can Labour Regulation Hinder Economic Performance? Evidence from India

Publication Date

20/03/2002

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Abstract

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.