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Market concentration and labour employment in Indian organized manufacturing, post-reforms

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Abstract

The post-reform ‘Free market enterprise’ systems and forms of governance adopted in Indian manufacturing have been widely debated and argued to be associated with a jobless manufacturing growth. The study uses market concentration and monopoly power indices, post-reforms, to determine the level of competition and labour exploitation. A panel data regression with employment as the dependent variable has found: Free market enterprise has a semi-definitive impact on the employment of labour. The variables: (1) market concentration leads to an increase in the level of employment and wages. However, (2) monopoly power leads to a decline in the level of employment and an indefinite effect on wage growth. This study is significant in understanding jobless growth and the idea of capital reorganization and labour substitution. The study could relate to formulation of the antitrust policies and restrictive trade practices of monopolies in coherence with labour welfare.

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Notes

  1. Concentration indices used are Hirschman–

    Herfindahl index (HHI) and Concentration Ratio 4 (CR4)

    HHI is defined as the sum of square of market shares, implying an industry with one firm has HHI equal to 1, whereas a Herfindahl close to zero implying a large number of firms in the industry with all firms having an equitable market share. The index is worked out using the micro-data of firm’s sales value. HHI = ∑ i = 1,2,3,….,N (100 − S i )2 or HHI = ∑i − 1,2,3,…,N (Market Share i )2.

    CR4 = ∑ i − 1,2,3,4. S i /S t . Here S t is the sales of the industry in total for a financial year or a period.

  2. The empirical evidence is through a panel data analysis of market concentration using firm level CMIE data, 1999–2013. Market concentration is calculated using Hirschman–Herfindahl index (HHI) and Concentration Ratio 4 index (CR4) discussed below.

  3. See Industrial Economics, M.A Beg (2016) page 43–52 Chapter 5; and Barthwal (1984) Innovation and Patents’ Page 123–14.

  4. \({\text{Gini}} = \frac{n + 1}{n} - \frac{{2\sum {(n + 1 - i)} }}{n\sum x }\).

  5. \({\text{Mark - up}} = Y_{it} - ({\text{RM}}_{it} - {\text{PF}}_{it} - {\text{SW}}_{it} ) \div Y_{it}\) (Y: Output, RM: Raw Materials Costs, PF: power and Fuel expenditure, SW: Salaries and Wages).

  6. For administered price theory see Sweezy ‘Kinked Demand’ model (economic theory and applications, Schaum Series 8th edition).

  7. Mean value of employment in industries is not similar owing to the size and structure of industries. Total initial capital, fixed and overtime variable capital are determining factors of men value of employment.

  8. See Appendix Table 7.

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Acknowledgements

I sincerely thank Professor Ravi S. Srivastava, CSRD (JNU) for giving me the opportunity to do research under his supervision and providing invaluable guidance throughout.

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Authors and Affiliations

  1. University of Delhi, New Delhi, Delhi, India

    Ashish Kumar Sedai

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  1. Ashish Kumar Sedai
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Correspondence to Ashish Kumar Sedai.

Appendix

Appendix

See Figs. 1, 2 and 3, Table 7.

Fig. 1
figure 1

Source: ASI and CMIE

Change in workers share in total emoluments. 1999–2012

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Fig. 2
figure 2

Source: ASI and CMIE

Change in the degree of monopoly power, three-digit industry group. 1999–2012.

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Fig. 3
figure 3

Source: ASI and CMIE

Change in the level of concentration, three-digit industry group 1999–2012.

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Table 7 Mean standard deviation and min–max values of (i) growth rate of workers (ii) growth rate of other employees
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Sedai, A.K. Market concentration and labour employment in Indian organized manufacturing, post-reforms. J. Soc. Econ. Dev. 19, 94–110 (2017). https://doi.org/10.1007/s40847-017-0041-3

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