Labour Use and its Adjustment in Indian Manufacturing Industries

33 Pages Posted: 19 May 2005

See all articles by Amit K. Bhandari

Amit K. Bhandari

RBC College; IZA Institute of Labor Economics

Almas Heshmati

Sogang University; Jönköping International Business School

Date Written: May 2005


This study provides an empirical investigation of the adjustment process of labour in Indian manufacturing industries, which evolved through structural transformation in the era of globalization. The analysis is based on a dynamic model applied to a panel of 22 two-digit manufacturing industries for the time period of 22 years covering 1980/81 to 2001/02. We assume that as competition increases industries adjust their employment to a desired level which is both industry and time specific. The results indicate that the manufacturing sector has shown a considerable dynamism in adjusting its workforce. The long run labour demand responds greatest to the output, followed by capital and least by wages. It is observed that Indian manufacturing is not inefficient in labour use as modest speed of adjustment has led employment size closer to the optimal level.

Keywords: labour use, employment, adjustment, globalization, manufacturing, India

JEL Classification: C23, J23, L60

Suggested Citation

Bhandari, Amit K. and Heshmati, Almas, Labour Use and its Adjustment in Indian Manufacturing Industries (May 2005). Available at SSRN: or

Amit K. Bhandari (Contact Author)

RBC College ( email )

North 24 Parganas
Naihati, 743134

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072

Almas Heshmati

Sogang University ( email )

Seoul 121-742
Korea, Republic of (South Korea)
0082-2-705-8771 (Phone)


Jönköping International Business School ( email )

Jönköping, 551 11

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