Does labor composition impact the transmission of monetary policy to output?

Bujunoori, Raja Reddy, Mannil, Nithin and Tantri, Prasanna (2024) Does labor composition impact the transmission of monetary policy to output? Journal of Development Economics, 167. ISSN 0304-3878

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Abstract

We ask whether the presence of contract workers influences the sensitivity of firm output to monetary policy shocks. We use a judgment of the Supreme Court of India that facilitated the hiring of contract workers as a setting that exogenously increased their presence, especially in states with stringent labor laws. Difference-in-differences and triple-difference tests show that the sensitivity of output to monetary policy shocks moderates due to the presence of contract workers. The relative flexibility of contract workers’ wages and not the relative ease of hiring/firing is the mechanism. Additional analysis shows that the moderation in output sensitivity is stronger during monetary contractions.

Item Type:	Article
Official URL:	https://www.sciencedirect.com/journal/journal-of-d...
Additional Information:	© 2023 Elsevier B.V.
Divisions:	Finance
Subjects:	H Social Sciences > HG Finance H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor
JEL classification:	J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc. J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining > J53 - Labor-Management Relations; Industrial Jurisprudence L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L24 - Contracting Out; Joint Ventures; Technology Licensing
Date Deposited:	25 Jan 2024 10:21
Last Modified:	15 Nov 2024 02:48
URI:	http://eprints.lse.ac.uk/id/eprint/121576

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