Labour Reforms in the Indian State of Rajasthan: a boon or a bane?

Goswami, Diti and Paul, Sourabh (2021) Labour Reforms in the Indian State of Rajasthan: a boon or a bane? Working Paper. Azim Premji University, Bengaluru.

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The authors examine the impact of labour law deregulations in the Indian state of Rajasthan on plant employment and performance. In 2014, after a long time, Rajasthan was the first Indian state that introduced labour reforms in the Industrial Disputes Act (1947), the Factories Act (1948), the Contract Labour (Regulation and Abolition) Act (1970), and the Apprentices Act (1961). Exploiting this unique quasi-natural experiment, the authors apply a difference-in-difference framework using the Annual Survey of Industries longitudinal data of India's manufacturing establishments. Their results show that reforms had an unintended consequence of the decline in labour use. Also, worryingly, the flexibility resulted in a disproportionate decline in the directly employed worker. Evidence suggests that the reforms positively impact the value-added and productivity of the establishments. The strength of these effects varies depending on the underlying industry and reform structure. These findings prove robust to a set of specifications.

Item Type: Monograph (Working Paper)
Authors: Goswami, Diti and Paul, Sourabh
Document Language:
Uncontrolled Keywords: labour law reforms, employment, productivity, difference-in-differences, establishment level, India
Subjects: Social sciences > Economics
Divisions: Azim Premji University > Research Centre > Centre for Sustainable Employment
Full Text Status: Public
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