New research shows that 'extortionary' corruption on the part of factory inspectors in India is helping to drive up the cost of the country's labour regulations to business.
University of Kent economist Dr. Amrit Amirapu, along with Dr. Michael Gechter of the Pennsylvania State University, US, conducted the research, which found that a particular set of regulations—including mandatory benefits, workplace safety provisions and reporting requirements—increase firms' per-worker labour costs by 35% on average across India.
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The study also found that the effective cost of the regulations varies widely and is much higher than the 35% average figure in regions and industries that are more exposed to corruption by public officials.
The study also shed light on the puzzle of why some of the most significant problems faced by developing countries—including low labour force participation rates and low levels of employment in the formal sector—are often...
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