Question

Analyse the effects of the decline of industries in India.​

Answer 1

Answer:

lores whether trade can explain a part of the sharp decline in the labor share

of Indian formal industries from around 30% in 1980 to less than 10% in 2014. Decline in

strikes and lockouts, reduced labor time lost from disputes per factory and increased use

of contract workers in all major states in India are signs of reduced bargaining power. In order

to estimate the influence of trade, the mark-up and bargaining power affecting the labor share

and resultant productivity is derived. A semi-parametric approach is applied on a

3-digit level of industrial data over major states during 1998–2014 to regress Solow residual

(the proxy for productivity) on trade share along with its interaction terms capturing market

imperfections. The results confirm that trade, by dampening the bargaining power of

labor, reduces labor share and hence raises productivity. It is argued that the joint effects

of market size and competition arising out of trade cannot dominate the adverse effect

of specialization in the presence of unions. The degree of specialization or comparative

advantage that appears due to the increased market share of the most productive firms,

who require fewer workers, thereby reducing the demand for workers with the trade. The drop

in demand weakens bargaining power and shifts away distributive share from workers. But

the competitive policy encouraging entry can negate such adverse effects of trade,

Explanation:

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Answer 2

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