TITLE:
Labour Disputes and the Manufacturing Sector’s Growth: Recent Evidence from Indian States
AUTHORS:
Siddhartha Nath, Sauhard Srivastava
KEYWORDS:
Labour Disputes, Steady-State, Manufacturing, Instrumental Variable, Indian
JOURNAL NAME:
Theoretical Economics Letters,
Vol.12 No.3,
June
9,
2022
ABSTRACT: The persistent variation among Indian states in
per-capita value added from manufacturing sector has raised question whether
the long-run equilibria in the manufacturing sector differ among the states. In this paper, we
provide empirical evidence on whether labour disputes in the form of strikes,
lockouts, temporary closure etc., have caused any variation in these equilibria
for the recent period. Available data suggests that in 9 out of 16 states in
our sample, labour disputes have generally reduced between 2001 and 2017, while
in others labour disputes mostly characterised as random shocks with little
predictability. Our two-stage least squares estimates using states’ election
cycles as instrument for the labour disputes suggest that these labour disputes
with little persistence did not have much influence over the inter-state
differences in the equilibrium capital-labour ratios in “registered” manufacturing units between 2001 and 2017. However, 1 percent increase in
labour disputes might be associated with 3.2 percent reduction in total factor
productivity for the sector in states where disputes were random events. In the
remaining states, where labour disputes have consistently fallen over time,
this effect is significantly reduced. Our findings are robust in different
sample of firms.