and Rodrigues 2021) and China (Cheng, Loo, and Vickerman 2015). Public transit in the United States was accompanied by greater hiring in general or of minority workers (Holzer, Quigley, and Raphael 2003; Tyndall 2017).

A boost to public, private or foreign direct investment could also unlock the technological progress and productivity gains needed to fuel aggregate demand and create jobs. Similar to trade openness or liberalization, technological change has been associated with localized employment losses, yet it had mixed aggregate effects and effects in EMDEs.

Automation or robotization provides an example. In the United States, increased use of robots has been accompanied by employment declines in specific commuting zones and industries, but aggregate effects have been found to be mixed (Acemoglu and Restrepo 2018; 2020; D. Autor and Salomons 2018). A classification of the occupations at risk from new technologies yielded net employment gains in the United States (Vermeulen et al. 2018). The introduction of robots has not been associated with aggregate changes in hours worked in a broader group of countries in the Organisation for Economic Co-operation and Development, or with net employment losses in Germany (Dauth et al. 2017; Graetz and Michaels 2018). Few studies have examined the employment impact of new technologies in EMDEs, but those that have found either net employment losses (Carbonero, Ernst, and Weber 2020) or no strong evidence of employment changes (Maloney and Molina 2016).

An array of investment-related variables is used to capture the dynamism of investment and technology improvements. Gross capital formation and credit to the private sector—in percent of GDP—are used to proxy for total and private investment. Data is drawn from the WDI. Variables capturing access to finance are included to proxy for potential investment, including the number of commercial bank branches per 100,000 adults, log per capita outstanding loans and outstanding deposits in commercial banks, all from the International Monetary Fund’s _Financial Access Survey_ . Implicitly, this assumes that private credit and banking sector activities are used for purposes that correlate with job creation and predominantly in the private sector. This assumption may not hold if a large part of private credit is extended to state-owned enterprises or for other purposes than job creation.

# **Product and labor market flexibility**

Labor laws allowing firms more flexibility can boost employment, especially in the formal sector. A review of the literature has documented the adverse effects of restrictive labor laws on employment (Betcherman 2015). Most (but not all) studies find that minimum wage legislation in EMDEs has been associated with modest but significant employment losses, especially in the formal sector and among low-wage workers. Studies on the employment impact of employment protection legislation typically find no significant impact. Active labor market programs—which seek to encourage hiring through job training, wage subsidies, and job search assistance—have not been shown to have any significant employment effects in EMDEs (McKenzie 2017).

For India, two labor-related policies have been most studied. First, the Industrial Disputes Act (IDA) provides employment protection to workers. The law has been found to increase labor market rigidity (Datta-Chaudhuri 1996); reduce employment and output, and increase temporary or contract labor (Besley and Burgess 2004; Dutta 2003; Hasan, Mehta, and Sundaram 2021; Ramaswamy 2003); and dampen the employment benefits of trade liberalization (Hasan, Mitra, and Ramaswamy 2007). Second, the National Rural Employment Guarantee Act (NREGA) program, the largest public works program in the world, provides guaranteed employment to rural workers at the state-defined minimum wage. The program has been found to crowd out private 13