Structure of Labour Market in Coir Spinning and Its Implications for Workers' Welfare: Evidence from Kerala

The coir industry in Kerala is one of the oldest traditional and rural employment-generating industries in Kerala, but the persistence of labour market imperfections significantly influences worker outcomes. Although previous studies qualitatively highlight these imperfections, quantitative evidence on the degree of monopsony power remains scarce. This study estimates the elasticity of labour supply as a direct indicator of the monopsony power in the coir spinning labour market and its effects on workers' welfare. The study uses panel data from 40 coir primary societies in the Alappuzha district from 2010 to 2024. To deal with the possibility of endogeneity between wage and labour supply, use a log–log OLS model and a Two Stage Least Squares(2SLS) panel regression. The Baseline OLS results show a wage elasticity of 0.838 and a bonus elasticity of 0.100, reflecting an inelastic labour supply and limited responsiveness to monetary incentives. After correcting for endogeneity, the 2SLS results indicate a higher wage elasticity (1.50) and a negative elasticity for bonuses (-0.38), suggesting the presence of income effects and structural constraints. Diagnosis tests confirm the strength and validity of instruments. The finding indicates that the monopsonistic condition persists in the coir spinning sector, underscoring the need for measures that enhance the wage structure, reduce labour immobility, and improve workers' welfare.