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Identifying the Aggregate Productivity Effects of Entry and Size Restrictions: An Empirical Analysis of License Reform in India

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  • A. V. Chari
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    Abstract

    Distortions in the allocation of resources between heterogeneous producers have the potential to generate large reductions in aggregate productivity, a point that has been stressed by recent studies. There is, however, little direct empirical evidence from actual policy experiments on the magnitude of these effects. This paper proposes a simple methodology that empirically identifies the separate effects of entry and size restrictions on aggregate productivity, and uses it to analyse the impact of a policy reform in India. (JEL L11, L24, O14, O47)

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/pol.3.2.66
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    Bibliographic Info

    Article provided by American Economic Association in its journal American Economic Journal: Economic Policy.

    Volume (Year): 3 (2011)
    Issue (Month): 2 (May)
    Pages: 66-96

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    Handle: RePEc:aea:aejpol:v:3:y:2011:i:2:p:66-96

    Note: DOI: 10.1257/pol.3.2.66
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    1. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 295-316.
    2. Chang-Tai Hsieh & Peter J Klenow, 2008. "Misallocation and Manufacturing TFP in China and India," 2008 Meeting Papers 121, Society for Economic Dynamics.
    3. Barry Bosworth & Susan M. Collins & Arvind Virmani, 2006. "Sources of Growth in the Indian Economy," India Policy Forum, Global Economy and Development Program, The Brookings Institution, vol. 3(1), pages 1-69.
    4. Kalpana Kochhar & Utsav Kumar & Raghuram Rajan & Arvind Subramanian, 2006. "India's Patterns of Development: What Happened, What Follows," NBER Working Papers 12023, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Prantl, Susanne & Spitz-Oener, Alexandra, 2014. "Interacting product and labor market regulation and the impact of immigration on native wages," IAB Discussion Paper 201404, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    2. Kathuria, Vinish & Rajesh Raj, S.N. & Sen, Kunal, 2013. "The effects of economic reforms on manufacturing dualism: Evidence from India," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1240-1262.

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