Technology and Labor Regulation : Evidence from the Retail Sector in India

A commonly held but untested belief is that the adoption of modern technology such as computers could be endogenous to labor regulations. We test for this belief using micro data at the store level for the retail sector in India. Our results show a strong positive relationship between the severity of labor laws and computer usage confirming the stated belief while for other business regulations, this relationship is negative. We discuss the broader implications of our findings for employment generation, income inequality between the skilled and unskilled and for estimating the productivity enhancing effects of computer usage