Environmental standards and political federalism: Do labor legislations matter?

• Examines the impact of state labor laws on environmental standards, using India as a case study.
• Regulations that increase the cost of resolving industrial disputes are associated with large improvements in environmental standards.
• Strong complementarities exist between different labor laws.
• The analysis also suggests that political factors play an important role in impacting environmental standards, either directly or indirectly via its interaction with labor legislations.

The relevance of labor laws in affecting the environment has not been adequately addressed in the literature. Employing data on Indian states for 1981–2000, the results appear to suggest that different labor laws exert an uneven impact on the environment, either directly or in association with state political characteristics. Importantly, we also find strong complementarities between dispute resolution mechanism and other relevant labor laws.