Determinants of Employment Intensity of Growth in India: An Insight from Panel Data

Abstract

This study examines the employment elasticity of growth at the sectoral level using the KLEMS database for the period 1980–1981 to 2018–2019. After estimating elasticity, we employ the dynamic ordinary least square (DOLS) technique to investigate its determinants. The elasticity for the overall period falls between 0.91 and −0.039. Elasticity estimation at the sub-period level varies across three different sub-periods. Agriculture, hunting, forestry and fishing, and mining and quarrying observed negative elasticity of −0.58 and −0.63, respectively, whereas services and construction show the highest positive elasticity. The DOLS estimation shows that in the full panel, labour quality and wages positively impact employment elasticity of growth, whereas the dummy representing the reforms of 1991 negatively impacts employment elasticity. The magnitude of the coefficient of the workers involved in strikes and lockouts and days lost due to strikes is zero although it is significant. The sectoral analysis shows that the sign and significance of the coefficients vary across the industries except for labour quality. Labour quality is positively significant for almost all the industries in both equations. Wages and employment elasticity observe unique patterns, for example relatively highest and lowest-paying sectors observe reduced employment elasticity. Finally, we suggest that specific policy formulation and efforts are needed to be in place to promote quality of labour and relish real demographic dividends.