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The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India

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Author Info
Aghion, Philippe
Burgess, Robin
Redding, Stephen J
Zilibotti, Fabrizio

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Abstract

This paper investigates whether the effects, on registered manufacturing output, employment, entry and investment, of dismantling the 'license raj' - a system of central controls regulating entry and production activity in this sector - vary across Indian states with different labour market regulations. The effects are found to be unequal depending on the institutional environment in which industries are embedded. In particular, following delicensing, industries located in states with pro-employer labour market institutions grew more quickly than those in pro-worker environments. Our results emphasize how local institutions matter for whether industry in a region benefits or is harmed by the nationwide delicensing reform.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5492.

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Date of creation: Feb 2006
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Handle: RePEc:cpr:ceprdp:5492

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Keywords: delicensing economic development labour regulation

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Find related papers by JEL classification:
O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Regional, Urban, and Rural Analyses
O21 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Eric V. Edmonds & Nina Pavcnik & Petia Topalova, 2007. "Trade Adjustment and Human Capital Investments: Evidence from Indian Tariff Reform," NBER Working Papers 12884, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Natalie Chen & Jean Imbs & Andrew Scott, 2006. "The dynamics of trade and competition," Research series 200610-3, National Bank of Belgium. [Downloadable!]
  3. Poonam Gupta & Rana Hasan & Utsav Kumar, . "What Constrains Indian Manufacturing?," Indian Council for Research on International Economic Relations, New Delhi Working Papers 211, Indian Council for Research on International Economic Relations, New Delhi, India. [Downloadable!]
  4. Simon Commander & Jan Svejnar, 2007. "Do Institutions, Ownership, Exporting and Competition Explain Firm Performance? Evidence from 26 Transition Countries," IZA Discussion Papers 2637, Institute for the Study of Labor (IZA). [Downloadable!]
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