Does Flexible Labour Regulations Reduce Employment and Emolument Inequality? Empirical Evidence from India

This paper critically examines the approach of India's newly government initiative on pro-employer labour market reform that aims to stimulate economic growth and reduce inequality. Using a constructed Theil Inequality Index on employment and emoluments, the paper provides empirical evidence on lack of reduction in inequality, even in so called ‘pro-employer states' for the period between 1980-2008. The results obtained from this paper do not claim to draw any causal inference, but rather it offers a cautionary signal to those in the government who holds a belief that the only substantial reform in labour laws in pro-employer direction would not be able to solve all India's growth problems