File2-page34 - (iii) reduces overall manufacturing output....

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Regulation and Development α ↓ ⇒ ↓ labour Pro-worker regulation s cost of capital leading to in capital and labour used in registered Frms Parameters (Frm cut-off size, employer’s bargaining power) will de- termine whether Frms chooses - inactivity - entry into unregistered sector - entry into registered sector An increase in the labour’s bargaining power (i) reduces output, capital formation & employment in the regis- tered manufacturing sector (ii) increases output in the unregistered manufacturing sector
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Unformatted text preview: (iii) reduces overall manufacturing output. Empirical Evidence Data for 16 main states in India: 1958-92 Income (Total, Non-agricultural, Total Manufacturing, Registered and unregistered manufacturing) Within registered manufacturing (Employment, ixed capital, Earn-ings, Value added per worker) Poverty (Urban, Rural) Regression of the form y st = s + t + r st 1 + x st + st y st variable of interest (typically in logs) s state Fxed effects Development Economics, LSE Summer School 2007 31...
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