Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/256987 
Year of Publication: 
2019
Citation: 
[Journal:] Economies [ISSN:] 2227-7099 [Volume:] 7 [Issue:] 2 [Article No.:] 55 [Publisher:] MDPI [Place:] Basel [Year:] 2019 [Pages:] 1-42
Publisher: 
MDPI, Basel
Abstract: 
Theory and economic intuition suggest that domestic institutions influence the employment impact of economic reform, but the evidence base is thin. This paper seeks to address this by examining the extent to which differences in regional labour market flexibility shaped the impact of unanticipated economic reforms on employment in informal (unregistered) manufacturing enterprises in India (1990-2001). It employs a difference-in-differences strategy and finds that tariff reductions are not associated with significant employment shifts in informal enterprises, a finding that may be attributable to the fact that these enterprises rarely engage in international trade. However, on average and ceteris paribus, delicensing (FDI reform) is associated with statistically significant increases (increases) in informal employment and informal enterprise numbers in inflexible (flexible) labour markets. There is some evidence that the delicensing effect is attributable to increases in product market competition in delicensed industries. However, the channel underlying the result associated with FDI reform is less clear. In light of the persistent primacy of the informal sector in India and other developing economies, these findings have substantial policy relevance.
Subjects: 
economic reform
informal sector
employment
labour market flexibility
India
JEL: 
E24
E26
F16
J46
O2
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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