Labor Regulations and the Cost of Corruption: Evidence from the Indian Firm Size Distribution | Zendy

Amrit Amirapu | Zendy; Michael Gechter | Zendy

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Labor Regulations and the Cost of Corruption: Evidence from the Indian Firm Size Distribution

Author(s) -

Amrit Amirapu,

Michael Gechter

Publication year - 2019

Publication title -

the review of economics and statistics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 8.999

H-Index - 165

eISSN - 1530-9142

pISSN - 0034-6535

DOI - 10.1162/rest_a_00837

Subject(s) - distribution (mathematics) , language change , labor cost , unit (ring theory) , economics , business , unit cost , industrial organization , econometrics , labour economics , microeconomics , mechanical engineering , art , mathematical analysis , mathematics education , mathematics , literature , engineering

In this paper, we estimate the costs associated with an important suite of labor regulations in India by taking advantage of the fact that these regulations apply only to firms above a size threshold. Using distortions in the firm size distribution together with a structural model of firm size choice, we estimate that the regulations increase firms' unit labor costs by 35%. This estimate is robust to potential misreporting on the part of firms and enumerators. We also document a robust positive association between regulatory costs and exposure to corruption, which may explain why regulations appear to be so costly in developing countries.

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