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Stricter labor laws means more computer use

Stricter labor laws means more computer use

The Private Sector Development blog at the World Bank has a cool post on the effect of labor laws on computer use. Social scientists have theorized that the stricter the regulations on hiring and firing workers, the more companies turn to computers and technology.

Turns out that conventional wisdom is correct, a World Bank study shows:

Amin (2009) tests this hypothesis on 1,948 retail stores in India using data from Enterprise Surveys, a regular World Bank survey on firm performance, firm characteristics and the business climate….The study finds that the percentage of retail stores that use computers rises by 6.2 percentage points as we move from the state with the least to the median level of rigid labor laws. This is a large effect given than only 19% of the stores in the sample use computers.

The PSD blog cautions against reading too much into the results, though: 

That is, to properly understand the computers/productivity relationship one needs to distinguish between the motive of saving labor because of labor regulations and the motive of enhancing efficiency through computer usage. To what extent these effects hold remains to be empirically ascertained – an important task given that the use of computers and other modern devices is fast spreading across the globe.

But there’s a nice synergy there. And I wonder whether the same scientists have studied the corollary between India as an outsourcing hub and an IT giant.