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

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Besley & Burgess (2004) Regulation and Development α ↓ ⇒ ↓ capital & labour Pro-worker regulation s share of employers rents & s cost of capital leading to in capital and labour used in registered firms Parameters (firm cut-off size, employer’s bargaining power) will de- termine whether firms 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 + β t + θ r st − 1 + ξ x st + ε st y st – variable of interest (typically in logs) s – state Fxed effects Development Economics, LSE Summer School 2007 31...
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