Estimating Determinants of Contractualization of Workers in Organized Sector in India

The structural adjustment programme adopted in 1990 led to the removal of all existing pre-reform regulations and restrictions imposed on the Indian industries. This radically transformed India’s trade relations with international markets. The liberalization of Indian economy on one hand accelerated foreign capital as well as technology influx while on the other hand increased competition for the domestic economy. Thus the increased openness and flexibility arising from the economic transformation prompted the domestic producers to resort to alternative informal routes of employment thereby leading to increased contractualization of employment substituting of regular workers by contract workers in the manufacturing industries. Thus this paper is an empirical study which focuses on exploring and identifying the industry specific factors which are affecting the degree of casualization in Organized manufacturing sector of India. Panel regression using STATA has been used and the econometric analysis reveals that average firm size, value of output, capital intensity, profit per worker and welfare benefits for workers have considerable favourable effect on the employment of contractual workers while trade union activity and the ratio of male to female workers employed have significant negative impact on contract worker employment in the manufacturing industries of the organized sector in India. Keywords: contractualization, capital intensity, trade union activity, feminization, panel regression JEL Classification: C33, J21, L60