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Development Economics Paper
Can Labour Regulation Hinder Economic Performance? Evidence from India
Timothy Besley and Robin Burgess
February 2002
Paper No' DEDPS 33:
Full Paper (pdf)

Tags: indian industrial relations; industrial disputes act; manufacturing growth; pro-worker regulations; urban poverty; capital and labour.

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.