Regulation and Noncompliance: Magnitudes and Patterns for India's Factories Act

25 Pages Posted: 20 Apr 2016

See all articles by Urmila Chatterjee

Urmila Chatterjee

World Bank

Ravi Kanbur

Cornell University; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Date Written: January 1, 2014

Abstract

Noncompliance with regulations by enterprises is said to be rife in developing countries. Yet there is limited systematic evidence of the magnitude of noncompliance at the enterprise level. Making innovative use of two complementary data sources, this paper quantifies noncompliance for India's Factories Act without the question of illegality ever being raised directly with enterprises. The paper finds that more than twice as many firms are not complying as are complying. Further, the number of noncompliant firms is much larger than the number of firms adjusting out of the regulation. Thus noncompliance with the Factories Act is a key feature of the "missing middle" in India. The paper explores the main trends and patterns of noncompliance and highlights a number of key issues for further analytical and policy research.

Keywords: Microfinance, Regulatory Regimes, Labor Markets, Labor Policies, Small Scale Enterprise

Suggested Citation

Chatterjee, Urmila and Kanbur, Ravi, Regulation and Noncompliance: Magnitudes and Patterns for India's Factories Act (January 1, 2014). World Bank Policy Research Working Paper No. 6755. Available at SSRN: https://ssrn.com/abstract=2384237

Urmila Chatterjee (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Ravi Kanbur

Cornell University ( email )

301-J Warren Hall
Ithaca, NY 14853
United States
607-255-7966 (Phone)
607-255-9984 (Fax)

HOME PAGE: http://www.kanbur.dyson.cornell.edu

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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