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Demand shocks and employment adjustments: Does employment protection legislation create rigidity?
Author(s) -
SOFI Irfan Ahmad,
KUNROO Mohd Hussain
Publication year - 2018
Publication title -
international labour review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.433
H-Index - 46
eISSN - 1564-913X
pISSN - 0020-7780
DOI - 10.1111/ilr.12116
Subject(s) - employment protection legislation , labour economics , economics , proxy (statistics) , manufacturing sector , panel data , demand shock , differential (mechanical device) , legislation , job creation , labor demand , demographic economics , unemployment , monetary economics , economic growth , machine learning , computer science , wage , engineering , aerospace engineering , law , political science , econometrics
Abstract With state‐level panel data from the Indian manufacturing sector for 2000–12, and labour turnover as a proxy for employment adjustments, the authors estimate differential effects of demand shocks on employment adjustment across states with high and low levels of EPL. They find that EPL does not hinder employment adjustment; the response of labour separation rates to negative demand shocks is relatively higher in states with high levels of EPL, and labour turnover is inversely associated with EPL, which may be viewed as indicative of the beneficial effects of EPL for both enterprises and workers.