Firing Costs and Flexibility: Evidence from Firms' Employment Responses to Shocks in India
利用印度数据，研究发现降雨冲击通过农业影响当地需求，而劳动法规较宽松的地区，工业就业对冲击的反应更敏感，验证了动态劳动需求模型的预测。
A key prediction of dynamic labor demand models is that firing restrictions attenuate firms' employment responses to economic fluctuations. We provide the first direct test of this prediction using data from India. We exploit the fact that rainfall fluctuations, through their effects on agricultural productivity, generate variation in local demand within districts over time. Consistent with the theory, we find that industrial employment is more sensitive to shocks where labor regulation is less restrictive. Our results are robust to controlling for endogenous firm placement and vary across factory size in a pattern consistent with institutional features of Indian labor law.