Job Reallocation Dynamics in India: Evidence from Large Manufacturing Plants

Abstract

The paper contributes to the limited literature on job reallocation dynamics in Indian manufacturing. The study uses annual data from the Annual Survey of Industries (ASI) for the years 2000–01 to 2015–16. The study finds job reallocation in India to be quite high compared to flexible labour markets such as the United States and Canada. Gross job reallocation shows a rising trend over time, which is driven partially by the increasing share of contract workers in the workforce. There is heterogeneity in the job reallocation dynamics across job types. This is evident in the relative importance of the different job types as plants adjust to permanent and temporary changes in demand. Labour regulations also play an important role in such a process. Finally, in contrast to the evidence for the United States and the United Kingdom, our study found firm evidence to reject the hypothesis that job reallocation is countercyclical in India.

Productivity and job reallocation: evidence from the Indian manufacturing

“…However, I consider the job movements of the establishments in both sample and the census sector as: (1) majority of the value-added and employment are in smaller establishments, (2) the smaller establishments are more dynamic in terms of entry and exit and hiring and firing (Haltiwanger et al, 2013), (3) can capture plant births and deaths. This helps address the limitations mentioned in Neog and Sahoo (2020) and thus contributes significantly to the literature.…”

“…, 2013), (3) can capture plant births and deaths. This helps address the limitations mentioned in Neog and Sahoo (2020) and thus contributes significantly to the literature.…”

“…Similarly, if a large establishment slides off the census cutoff point and disappears from the panel, it will not be treated as death as the plant's operating status in the year it last appeared in the panel does not indicate death. Another alternative way to analyze job reallocation was to consider only the large establishments of the census sector, as stated in Neog and Sahoo (2020). However, I consider the job movements of the establishments in both sample and the census sector as: (1) majority of the value-added and employment are in smaller establishments, (2) the smaller establishments are more dynamic in terms of entry and exit and hiring and firing (Haltiwanger et al, 2013), (3) can capture plant births and deaths.…”