Labor Adjustment in an Evolving Marketplace

This thesis is about the process of employment adjustment. It studies adjustment costs and their impact on employment and labor demand. It starts by describing key characteristics of India’s labor market; documents legal, economic, and social framework; investigates the impact and finds magnitudes of worker adjustment costs. Then, it estimates econometrically parameters of labor adjustment based on ASI industry data from 1973 to 1997. Specifically effects of the job security regime in India on employment are estimated while accounting for the concurrent impact of product markets’ liberalization. It establishes that adjustment costs are substantial, adjustment is slow, and competition mitigates only some of the adverse impact of adjustment costs. Third, it investigates retrenchment programs across countries. This one-time or episode form of adjustment is a preferred mechanism in the presence of excess labor. Multi-dimensional program designs are found to be more successful. These analy…

Contents

1. Introduction and Overview
1.1 The Indian Economy
1.2 The Worker Separation Regime
II. Labor Adjustment: Framework and Evaluation
2.1 Introduction
2.2 Framework – Labor Adjustment
2.2.1 Legal Framework
2.2.2 Economic Framework – Labor Institutions
2.2.3 Social Framework – Support Institutions
2.3 Impact of Labor Adjustment
2.3.1 Legal Impact – Enforcement
2.3.2 Economic Impact
2.3.3 Social Impact
2.4 Concluding Remarks
III. Labor Adjustment – An Empirical Evaluation
3.1 The Issues and Literature
3.1.1 Nature of Adjustment Costs
3.1.2 Alternative Structure of Adjustment Costs
3.1.3 Evidence on Adjustment Costs
3.1.4 Objectives
3.2 Data and Background
3.2.1 Dataset
3.2.2 Data Description
3.3 The Model and Regression Equations
3.3.1 Symmetric Quadratic Convex Adjustment Costs
3.3.2 The Regression Equations
3.3.3 GLS and System GMM Estimators
3.4 Results and Findings
3.4.1 Changes in the speed of adjustment – GLS
3.4.2 Changes in the speed of adjustment – System GMM Results
3.5 Concluding Remarks
IV. Public Sector Retrenchment Programs
4.1 Introduction
4.2 Conceptual Framework and Measurement Issues
4.3 Data Collection
TABLE OF CONTENTS (concld.)
4.4 Survey and Analysis of Cross country Evidence
4.4.1 Basic Facts
4.4.2 The Relationship Between Rehires, New Hires and Other Program
Characteristics
4.4.3 Summary Financial Indicators
4.4.4 Highlights of Individual Programs
4.4.5 Aggregate Factors
4.4.6 Missing Pieces — Measurement and Characterization of Adjustment Costs
4.5 Concluding Remarks
V. Conclusions
Tables
References

Author: Singh, Manisha G.

Source: University of Maryland

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Labor Adjustment in an Evolving Marketplace