Trade Reforms, Labor Regulations and Labor-Demand Elasticities: Empirical Evidence from India

55 Pages Posted: 4 Aug 2003 Last revised: 4 Nov 2010

See all articles by Rana Hasan

Rana Hasan

Asian Development Bank; University of Maryland - Department of Economics

Devashish Mitra

Syracuse University - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

K. V. Ramaswamy

Indira Gandhi Institute of Development Research (IGIDR) - Development Research

Date Written: August 2003

Abstract

Using industry-level data disaggregated by states, this paper finds a positive impact of trade liberalization on labor-demand elasticities in the Indian manufacturing sector. These elasticities turn out to be negatively related to protection levels that vary across industries and over time. Furthermore, we find that these elasticities are not only higher for Indian states with more flexible labor regulations, they are also impacted to a larger degree by trade reforms. Finally, we find that after the reforms, volatility in productivity and output gets translated into larger wage and employment volatility, theoretically a possible consequence of larger labor-demand elasticities.

Suggested Citation

Hasan, Rana and Mitra, Devashish and Ramaswamy, K. V., Trade Reforms, Labor Regulations and Labor-Demand Elasticities: Empirical Evidence from India (August 2003). NBER Working Paper No. w9879. Available at SSRN: https://ssrn.com/abstract=430593

Rana Hasan

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
808-944-7590 (Phone)
808-944-7399 (Fax)

Devashish Mitra (Contact Author)

Syracuse University - Department of Economics ( email )

The Maxwell School of Citizenship & Public Affairs
133 Eggers Hall
Syracuse, NY 13244-1020
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

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

K. V. Ramaswamy

Indira Gandhi Institute of Development Research (IGIDR) - Development Research ( email )

Gen A.K. Vaidya Marg Santoshnagar
Goregaon (East)
Mumbai, Maharashtra 400065
India
91 22 840 0919 (Phone)
91 22 840 4026 (Fax)

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