Deregulation, Misallocation, and Size: Evidence from India
AbstractThis paper examines the impact of the deregulation of compulsory industrial licensing in India on firm size dynamics and reallocation of resources within industries. Following deregulation, resource misallocation declines and the left-hand tail of the firm size distribution thickens significantly, suggesting increased entry by small firms. However, the dominance and growth of large incumbents remains unchallenged. Quantile regressions reveal that the distributional effects of deregulation on firm size are significantly non-linear. The reallocation of market shares toward a small number of large firms and a large number of small firms is characterized as the "shrinking middle" in Indian manufacturing. Small- and medium-sized firms may continue to face constraints in their attempts to grow.
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Bibliographic InfoPaper provided by Harvard Business School in its series Harvard Business School Working Papers with number 13-056.
Length: 53 pages
Date of creation: Dec 2012
Date of revision: Feb 2014
Other versions of this item:
- Laura Alfaro & Anusha Chari, 2012. "Deregulation, Misallocation, and Size: Evidence from India," NBER Working Papers 18650, National Bureau of Economic Research, Inc.
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
- O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
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- Christine Greenhalgh, 2013.
"Science, Technology, Innovation and IP in India - New Directions and Prospects,"
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660, University of Oxford, Department of Economics.
- Christine Greenhalgh, 2013. "Science, Technology, Innovation and IP in India: New Directions and Prospects," Melbourne Institute Working Paper Series wp2013n37, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
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