The Social Protection & Labor Sector (HDNSP) of the Human Development Network
sponsored this presentation by

Ahmad Ahsan (SAR) & Carmen Pagés (IADB)

This paper studies the economic effects of legal amendments on different types of labor laws.  The authors examine the effects of amendments to labor dispute laws, and amendments to job security legislation.  The authors also identify the effects of legal amendments related to the most contentious regulation of all: Chapter Vb of the Industrial Disputes Act, which stipulates that firms with 100 or more employees cannot retrench workers without government authorization.  The authors find that laws that increase job security or increase the cost of labor disputes substantially reduce registered sector employment and output but do not increase the labor share.  Labor-intensive industries, such as textiles, are the hardest hit by laws that increase job security while capital-intensive industries are most affected by higher labor dispute resolution costs.  The authors also find that the widespread and increasing use of contract labor may have brought some output and employment gains but did not make up for the adverse effects of job security and dispute resolution laws.

Presentation (437kb pdf)

Paper (310kb pdf)

About the Authors

Ahmad Ahsan is a Lead Economist in South Asia PREM.  Aside being involved from policy dialogue and operational work in the African and South Asia regions, Ahmad has written on aggregate growth, trade and manufacturing, fiscal and financial management, and more recently on labor market and sub-national development issues.  His work has covered Bangladesh, India, Malawi, Nepal and Pakistan, as well as cross country work done for the OED (now IEG).  A citizen of Bangladesh, Ahmad received his Master’s degree from Dhaka University, Bangladesh and Ph.D. in economics from Columbia University, New York.  Before joining the Bank, he has taught in these two universities and has also been a consultant to the Bangladesh Institute for Development Studies, the FAO, and the United Nations. 

Carmen Pagés is a Principal Economist at the Research Department of the Inter-American Development (IADB).  Her topics of research are the design of labor market policy, the causes and consequences of informality, and the impact of labor market regulations and more broadly, of the investment climate, on economic outcomes.  Among other studies, she co-authored a book on labor market regulations with Nobel laureate professor J. Heckman and was the director of the 2004 IADB flagship report on Labor markets in Latin America.  Her work has been published in leading academic journals in Economics.  She has also advised governments in a number of countries on matters related to labor reforms.  In addition to her tenure at the IADB she spent two years at the Social Protection Unit of the World Bank, where she developed a number of analytical studies on the impact of labor market regulations and institutions in India, Turkey and Kenya among others, and a regional study on employment and growth in Latin America.  A native of Spain, she holds a MA degree in Economics from the Universidad Autonoma de Barcelona and a Ph. D in Economics from Boston University.