Unions, wages and labour markets in Indian industry, 1960–86

The purpose of this article is to explain the movement of wages in the manufacturing sector in India for the period 1960–86. A ‘structuralist’ macroeconomic model is advanced where the changing strength, structure and activities of unions are considered explicitly. The objective is to disentangle the effects of factors specific to the bargaining process from the effects of overall economic development. We consider two available wage series and we make a priori assumptions regarding the nature of both the labour and product markets associated with these series. Our econometric results support our characterisations and we show that the effects of both union related variables and overall macroeconomic variables differ across the two wage series.