Preferential employment policies and firm performance: Evidence from Indian public sector enterprises

Abstract

This article examines the impact of job reservations on the performance of public sector enterprises (PSEs) in India. Drawing on data for all central government-owned manufacturing PSEs from 2014 to 2017 and employing instrumental variable techniques, the authors test the hypothesis that reservations benefit firm performance if implemented across all levels of the employment hierarchy. While the findings validate this hypothesis, they also indicate that the reserved categories are disproportionately represented in the lower end of the organizational hierarchy. This imbalance is primarily driven by systematic limitations in vacancy notifications and discriminatory practices within organizations.