INFORMALIZATION OF INDUSTRIAL LABOR IN INDIA: EFFECTS OF LABOR MARKET RIGIDITIES AND IMPORT COMPETITION

Authors


  • This paper was presented at the International Conference on “Science, Technology and Economy: Human Capital,” the Annual Conference of the Indian Association of Social Science Institutions and the Knowledge Forum, hosted by the Indian Institute of Technology, Mumbai, November 11–12, 2010, and subsequently at the Sixth Annual Conference on Economic Growth and Development, organized by the Indian Statistical Institute, New Delhi, December 16–18, 2010. We have benefited from comments received from participants at these two conferences. We are particularly thankful to Professor K. L. Krishna for his comments and suggestions on an earlier version of the paper. We thank three anonymous reviewers of this journal for their valuable comments, which have greatly improved the quality of the paper.

Abstract

Since the 1980s, industrial labor in India has been increasingly informalized, manifested in a rising share of unorganized sector employment and the growing use of temporary and contract workers, and subcontracting in organized manufacturing. Using unit-level data from the National Sample Survey employment–unemployment survey for 2004–5, the paper investigates econometrically whether labor market rigidities and import competition have been responsible for the informalization of industrial labor in India. The results of econometric models show that labor market reforms tend to increase the creation of regular jobs, while import competition tends to raise casual employment among workers with education levels above primary.

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