Estimating workers' bargaining power and firms' markup in India: Implications of reforms and labour regulations

This paper simultaneously estimates workers' bargaining power (WBP) and firm's markup (FMU) in Indian manufacturing industries, using state-wise three-digit industry-level panel data for the period 1980-2007. It also examines the association of WBP and FMU with industrial deregulation, trade liberalisation and labour regulations. Results of the econometric analysis suggest that WBP is negatively associated with both industrial deregulations and trade liberalisation, but there is no significant association of FMU with these reforms. Further, pro-worker amendments to selected provisions of Industrial Disputes Act 1947, but not all, seem to enhance WBP to some extent. In light of these findings, policy implications are brought out.