This article investigates the long-run relationship between labour productivity and employment, and between labour productivity and real wages in the case of the Indian manufacturing sector. The panel data set consists of 17 two-digit manufacturing industries for the period 1973-1974 to 1999-2001. We find that productivity-wages and productivity-employment are panel cointegrated for all industries. We find that both employment and real wages exert a positive effect on labour productivity. We argue that flexible labour market has a significant influence on manufacturing productivity, employment and real wages in the case of Indian manufacturing. © 2010 Springer-Verlag.

Badri Narayan Rath

Department of Liberal Arts

M. Bhattacharya

P.K. Narayan

S. Popp

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Journal	Empirical Economics
ISSN	03777332