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The impact of business environment and economic geography on plant-level productivity : an analysis of Indian industry

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Lall, Somik V.
Mengistae, Taye

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Abstract

The authors'analysis of manufacturing plants sampled from India's major industrial centers shows large productivity gaps across cities. The gaps partly reflect differences in agglomeration economies and in market access. However, they are also explained to a greater extent by differences in the degree of labor regulation and in the severity of power shortages. This is an indication that governments can help narrow regional disparities in industrial growth by fostering the"right business environment"in locations where industry might otherwise be held back by powerful forces of economic geography. There is indeed a pattern in the data whereby geographically disadvantaged cities seem to compensate partially for their natural disadvantage by having a better business environment than more geographically advantaged locations.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3664.

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Date of creation: 01 Jul 2005
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Handle: RePEc:wbk:wbrwps:3664

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  1. Arne Bigsten & Paul Collier & Stefan Dercon & Marcel Fafchamps & Bernard Gauthier & Jan Willem Gunning & Abena Oduro & Remco Oostendorp & Cathy Patillo & Måns S–derbom & Francis Teal & Albert , 2003. "Credit Constraints in Manufacturing Enterprises in Africa," Journal of African Economies, Oxford University Press, vol. 12(1), pages 104-125, March.
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  2. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March. [Downloadable!] (restricted)
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  3. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Lall, Somik V. & Shalizi, Zmarak & Deichmann, Uwe, 2004. "Agglomeration economies and productivity in Indian industry," Journal of Development Economics, Elsevier, vol. 73(2), pages 643-673, April. [Downloadable!] (restricted)
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  5. Hallward-Driemeier, Mary & Wallsten, Scott & Lixin Colin Xu, 2003. "The investment climate and the firm : firm-level evidence from China," Policy Research Working Paper Series 3003, The World Bank. [Downloadable!]
  6. Somik Vinay Lall & Sanjoy Chakravorty, 2005. "Industrial Location and Spatial Inequality: Theory and Evidence from India," Review of Development Economics, Blackwell Publishing, vol. 9(1), pages 47-68, 02. [Downloadable!] (restricted)
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  7. F. Zilibotti & P. Aghion & R. Burgess, 2004. "The Unequal Effects of Trade Liberalization: Theory and Evidence from India," 2004 Meeting Papers 40, Society for Economic Dynamics.
  8. Bastos,Fabiano & Nasir, John, 2004. "Productivity and the investment climate : what matters most?," Policy Research Working Paper Series 3335, The World Bank. [Downloadable!]
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  10. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June. [Downloadable!] (restricted)
  11. Benn Eifert & Alan Gelb & Vijaya Ramachandran, 2005. "Business Environment and Comparative Advantage in Africa: Evidence from the Investment Climate Data," Working Papers 56, Center for Global Development. [Downloadable!]
  12. Escribano, Alvaro & Guasch, J. Luis, 2005. "Assessing the impact of the investment climate on productivity using firm-level data : methodology and the cases of Guatemala, Honduras, and Nicaragua," Policy Research Working Paper Series 3621, The World Bank. [Downloadable!]
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  14. David G. Blanchflower & Phillip B. Levine & David J. Zimmerman, 1998. "Discrimination in the Small Business Credit Market," NBER Working Papers 6840, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476.
  16. Timothy Besley & Robin Burgess, 2004. "Can Labor Regulation Hinder Economic Performance? Evidence from India," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 91-134, February. [Downloadable!] (restricted)
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(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. Lall, Somik V. & Schroeder, Elizabeth & Schmidt, Emily, 2009. "Identifying spatial efficiency-equity tradeoffs in territorial development policies : evidence from Uganda," Policy Research Working Paper Series 4966, The World Bank. [Downloadable!]
  2. Sridhar, Kala Seetharam & Wan, Guanghua, 2007. "Firm Location Choice in Cities: Evidence from China, India, and Brazil," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
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