Sean Dougherty

Labour Regulation and Employment Dynamics at the State Level in India

India’s federal and state-level labour regulations are evaluated using a set of standardised tools. Though federal labour regulations are found to be highly restrictive in international comparison with OECD countries, there is considerable variation in the regulatory stance in individual Indian states. This variation in regulation is associated with a substantial degree of de facto job flexibility in the states that have undertaken more labour reforms, and less flexibility in those states and sub-sectors that have undertaken fewer reforms. Labour market reforms could serve to limit the detrimental effects that the consequentially high labour costs and rigidity have on the dynamism of the labour market, as well as to improve the labour wage share, limit the relative increase in informal employment and also enhance aggregate productivity.

The Effects of Federalism on Productivity in Chinese Firms

This study offers empirical evidence about how the structure of government and private ownership affected productivity in Chinese firms. It uses the microdata of Chinas last decennial industrial census, covering all of the 23,000 large and medium-sized industrial firms operating in China during 1995. The results show that government decentralization federalism played an important role in improving the performance of not just collective firms, but also state-owned and mixed public/private ownership firms. This result is strongly confirmatory of much of the recent theoretical work on transition economies that posits a key role for government in the efficient operation of markets.

Improving Human Capital Formation in India

The provision of high-quality education and health care to all of the population is considered a core element of public policy in most countries. In India, the government is active in both education and health but the private sector also plays an important role, notably for heath, and to a lesser extent in education. At present, the quality and quantity of the outputs from education, and also form public health care, are holding back the process of economic development. Steps are being taken to draw more children into primary education and the paper considers ways to keep children in school. It also considers institutional changes that may help to improve the performance of the educational system and so boost human capital formation. This working Paper relates to the 2007 Economic Survey of India (www.oecd.org/eco/surveys/india). Ameliorer la formation du capital humain en Inde Permettre a l’ensemble de la population de beneficier d’une education et de soins de sante de qualite est l’un des enjeux majeurs de la politique publique dans la plupart des pays. En Inde, les pouvoirs publics interviennent aussi bien dans l’education que dans les soins de sante, ce qui n’empeche pas le secteur prive de jouer un role important, en particulier dans le premier de ces domaines. A l’heure actuelle, les performances qualitatives et quantitatives de l’education et des services publics de sante constituent un frein au processus de developpement economique. Des mesures ont ete prises pour augmenter la frequentation de l’enseignement primaire, et le present document etudie les moyens de lutter contre les abandons scolaires. Il analyse egalement les changements institutionnels necessaires pour contribuer a ameliorer les performances du systeme educatif et stimuler ainsi la formation du capital humain. Ce document de travail se rapporte a l’Etude economique de l’Inde 2007 (www.oecd.org/eco/etudes/inde).

The structure and location of business R&D: recent trends and measurement implications

Cross-border flows of Research and Development (R&D) expenditure have been rising in recent years, but their implications for the organisation of the R&D process and the international dispersion of R&D activities are less well-understood. This paper provides an overview of the available statistical evidence which is complemented by the results of a series of interviews with R&D managers in various countries. The interviews suggest that the drivers of internationalisation differ substantially between research, on the one hand, and development, on the other. Research activities are usually concentrated in a single location, mostly near the firm headquarters, to exploit ties with universities and maximise cooperation across activities. Development is generally tied to individual business units and is more likely to be positioned in proximity to production locations.

Legal Reform, Contract Enforcement and Firm Size in Mexico

The variation in legal system quality across states in Mexico is used to examine the relationship between judicial quality and firm size over the course of the 2000s, when systemic changes were taking place. Using economic census microdata and survey-based measures of legal institutions, a robust effect of judicial quality is observed on the firm size distribution and efficiency, instrumenting for underlying historical determinants of institutions. Indicative evidence is found that the effect is strongest in more capital-intensive industries. Market size and distance-to-market are also found to matter for firm size outcomes, consistent with the new trade literature.

Domestic regulation, import penetration and firm-level productivity growth

This paper shows that the impact of import penetration on firms’ productivity growth depends on firms’ distance to the efficiency frontier and on product market regulation. Using firm-level data for a substantial number of OECD countries from the late 1990s to late 2000s, the analysis reveals nonlinear effects of both sectoral import penetration and de jure product market regulation measures, depending on firms’ positions along the global distribution of productivity. Close to the technology frontier, import penetration has a strongly positive effect on firm-level productivity growth, with less stringent domestic regulation enhancing this effect substantially. However, far from the frontier, the effect of import penetration on firm-level productivity growth is much smaller and often not significant. Its interaction with domestic regulation generally has no statistically significant effect either. The heterogeneous effects of import penetration and domestic product market regulation on firm-level productivity growth are consistent with a neo-Schumpeterian view of trade and regulation.