Does Employment Protection Legislation Matter in Dualistic Labor Market? Panel Evidence from Indian Manufacturing Sector

Abstract

The critics of pro-worker labor laws argue that employment protection legislation (EPL) hurts productivity and employment generation by creating rigidity in employment adjustments. The discourse on labor market rigidity has taken center stage in this neoliberal phase of the global economy and is now being echoed by the state as well. However, the sharp growth in informal employment over the last two decades, cutting across developing as well as developed countries, puts a question mark over the tenability of the "flexibility thought" invoked by employers while demanding abrogation of job security legislation. In this study, we argue that there exists a substantial flexibility in contemporary labor markets. Using a panel dataset on twenty-eight industrial sectors across thirteen major states of India for the period 1999-2000 to 2007-2008, we find that EPL does not affect total factor productivity of industries. The impact of EPL is not significant even in highly volatile industries. The paper underlines the failure of the state to translate EPL into meaningful job security. The findings of this study suggest that the debates on labor regulations must be expanded to bring into its focus the issues of growing informalization and its consequences on workers.

Labor Institutions and Development Under Globalization

“…incorrectly attributing lower productivity in a given state to EPL. Acharya et al (2010), D'Souza (2010) and Sofi and Sharma (2015) provide a critique and more realistic findings for India. costs are responsible for double-digit increases of unemployment in countries as diverse as India, Peru and Zimbabwe.…”

What Role Does EPL Play in Wage Determination under Segmented Labour Markets? A State-level Analysis from India’s Formal Manufacturing Sector

“…Since contract workers are excluded from EPL, they can be subjected to sudden dismissals and wage discrimination. According to ASI, contract workers receive less than 70 per cent wages of that of their regular counterparts (Sofi & Sharma, 2015b). Moreover, contract workers cannot form labour unions and are usually not registered with existing labour unions.…”

Policy evaluation and efficiency: a systematic literature review

“…Regression analyses constitute the main instrument of investigation (see Coupet and Barnum, 2010;Sofi and Sharma, 2015;Schubert and Yang, 2016;Vieira et al, 2018;Ding et al, 2020). However, standard regression analysis does not account for the fact that the efficiency score is bounded between 0 and 1, and therefore inference might be biased (for a discussion, see Hoff, 2007).…”

“…The literature on labor involves four studies, two on the effect of some policies on labor outcomes, such as employment (Feroz et al., 2001; Althin and Behrenz, 2004) and two that focus on the impact of labor policies on productivity (Sofi and Sharma, 2015; Cordero and Tzeremes, 2018).…”

“…Besides, the Mann-Whitney test and the Wilcoxon test are used to assess return to scale characterization (Puenpatom and Rosenman, 2008;Halkos and Tzeremes, 2009, 2010a, 2011aZhang et al, 2011), while the Jacknife and the Kruskal-Wallis tests are used to detect differences in the distribution of the efficiency scores (Waldo, 2007;Puenpatom and Rosenman, 2008). Waldo (2007), Halkos and Tzeremes (2011b), Haelermans and De Witte (2012), Broersma et al (2013), Sofi and Sharma (2015), Asatryan and De Witte (2015), Schubert and Yang (2016), Cordero et al (2017), Santín & Sicilia (2018), Lin and Zhu (2019) Note:. # is the symbol of cardinality, that is, the number of elements in a given set.…”