Employment Protection Legislation and Labour Market Outcomes: A Unit Level Analysis of the Indian Manufacturing Sector

Irfan Ahmad Sofi, Santosh Mehrotra, Adil Hussain Reshi

Research output: Contribution to journalArticlepeer-review

Abstract

Building on insights from the insider-outsider theory, we examine the effects of the Employment Protection Legislation (EPL) on labour market outcomes, using high-court verdicts on labour disputes invoking Chapter 5-A and 5-B of the Industrial Disputes Act. Our regression analysis of a statewise unit-level dataset suggests that pro-worker judicial verdicts lead to an increase in wages and labour productivity especially in labour intensive industries, but discourage employment. The study demonstrates how the insider-outsider model combined with the labour market segmentation theory, unlike labour adjustment models, explain such findings consistently. The results suggest that loosening the EPL regime will have implications on the balance between the quantity and the quality of jobs, with serious consequences on industrial performance.

Original languageEnglish
Pages (from-to)101-122
Number of pages22
JournalAsian Journal of Law and Economics
Volume13
Issue number1
Early online date28 Mar 2022
DOIs
Publication statusPublished - 1 Apr 2022
Externally publishedYes

Keywords

  • employment protection legislation
  • judicial outcomes
  • labour disputes
  • labour market segmentation
  • wages

ASJC Scopus subject areas

  • Law
  • Economics, Econometrics and Finance (miscellaneous)

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