APL (Ajiken Power Lunch)

APL (Ajiken Power Lunch) is a lunchtime workshop open to public, including IDE staffs, visiting research fellows, IDEAS students, outside researchers and graduate students. This workshop provides a platform for presentation of any work in progress where we can discuss in either English or Japanese.

Those who would attend a seminar are asked to announce yourself to receptionists on your arrival at the IDE and to obtain APL Organizers' signature on your admission card after the seminar.

June 15, 2018. (Friday) 13:30-15:00

Institute of Developing Economies, Japan External Trade Organization C23 Meeting Room 　

The effect of Trade on Labour Share and TFP Growth of Indian Industries

While trade redistributes the cost-price margin between between workers and firms, this paper investigates the joint effect of market size, competition and comparative advantage arising out of free trade on labour share and TFP growth in Indian industries. We extend a generalised oligopoly framework (Neary, 2016) to investigate these effects in the presence of labour union (assuming right-to-manage form). We find that if the joint effects of competition and comparative advantage exceed that of the market size, both union wage and labour share tend to decline. In order to investigate empirically, a Cobb-Dauglus production function is applied in Stochastic Frontier Approach to derive the extent of mark-up and bargaining power that influences the labour share, after controlling the level of technology, technical inefficiency and economies of scale. Using three-digit level of Indian industries during 1998-2007, it is observed that the trade openness has weakened the labour market rigidity more relative to the product market imperfection. This has contributed to the falling labour share and resultant residual Growth of the economy. The increased market share of productive firms crowds out the labour demand from low productive firms, driven by comparative advantage effect, has accentuated the fall of labour share and accelerated the resultant TFP growth.

Associate Professor Dibyendu Maiti (Delhi School of Economics, University of Delhi)

Kenmei Tsubota

English