Acceso usuarios
There is an intense debate on the impact of labour regulation in India today. Labour regulation in India differ state-wise and apply differently across types of workers (both regular and contract workers). This paper examines the joint effects of Employment Protection Legislation (EPL) and variable enforcement intensity on the growth in a size of temporary contract workers in the organised manufacturing sector. It uses the state level amendments to Industrial Dispute Act of 1947, and the average size of total number of labour inspectors for each state, as independent variables to capture the variation in labour regulations and enforcement intensity across thirty-one Indian states for the period 2000–2007. This paper argues that, average Indian firms located in strict EPL states hire differentially more temporary contract workers as compare to regular workers in response to variable enforcement intensity. Among other findings, the empirical analysis shows that firms prefer to employ excessive number of contract workers to circumvent firing and overall compliance costs of regular workers as stipulated by the Indian labour laws. Our results are robust to alternative specifications.
