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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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Listed author(s):
  • A. V. Chari

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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File URL: http://www.aeaweb.org/aej/pol/data/2010-0009_data.zip
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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
Contact details of provider: Web page: https://www.aeaweb.org/aej-policy
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Keywords:

Find related papers by JEL classification:

  • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
  • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
  • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
  • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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  1. Kochhar, Kalpana & Kumar, Utsav & Rajan, Raghuram & Subramanian, Arvind & Tokatlidis, Ioannis, 2006. "India's pattern of development: What happened, what follows?," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 981-1019, July.
  2. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1403-1448.
  3. Daron Acemoglu & Fabrizio Zilibotti, 2001. "Productivity Differences," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 563-606.
  4. Marianne Bertrand & Francis Kramarz, 2002. "Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1369-1413.
  5. 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.
  6. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
  7. 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.
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Cited by:

  1. Francesco Bripi, 2016. "The Role of Regulation on Entry: Evidence from the Italian Provinces," World Bank Economic Review, World Bank Group, vol. 30(2), pages 383-411.
  2. Susanne Prantl, 2012. "The impact of firm entry regulation on long-living entrants," Small Business Economics, Springer, vol. 39(1), pages 61-76, July.
  3. 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.
  4. Laura Alfaro & Anusha Chari, 2014. "Deregulation, Misallocation, and Size: Evidence from India," Journal of Law and Economics, University of Chicago Press, vol. 57(4), pages 897-936.
  5. Susanne Prantl & Alexandra Spitz-Oener, 2013. "Interacting Product and Labor Market Regulation and the Impact of Immigration on Native Wages," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2013_22, Max Planck Institute for Research on Collective Goods.
  6. Asturias, Jose & García-Santana, Manuel & Ramos Magdaleno, Roberto, 2016. "Competition and the welfare gains from transportation infrastructure: Evidence from the Golden Quadrilateral of India," CEPR Discussion Papers 11283, C.E.P.R. Discussion Papers.
  7. Seker, Murat, 2011. "Effects of licensing reform on firm innovation : evidence from India," Policy Research Working Paper Series 5876, The World Bank.
  8. Serguey Braguinsky & Lee G. Branstetter & Andre Regateiro, 2011. "The Incredible Shrinking Portuguese Firm," NBER Working Papers 17265, National Bureau of Economic Research, Inc.
  9. Mendoza, Ronald U. & Canare, Tristan A. & Ang, Alvin, 2015. "Doing Business: A Review of Literature and Its Role in APEC 2015," Research Paper Series DP 2015-37, Philippine Institute for Development Studies.
  10. Albert Bollard & Peter Klenow & Gunjam Sharma, 2013. "India's Mysterious Manufacturing Miracle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 59-85, January.
  11. Bas M. & Paunov C., 2014. "The unequal effect of India's industrial liberalization on firms' decision to innovate: Do business conditions matter?," MERIT Working Papers 044, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  12. Albert Bollard & Peter Klenow & Gunjam Sharma, 2013. "India's Mysterious Manufacturing Miracle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 59-85, January.
  13. Roberto Ramos & Manuel García-Santana & Jose Asturias, 2014. "Misallocation, Internal Trade, and the Role of Transportation Infrastructure," 2014 Meeting Papers 1035, Society for Economic Dynamics.
  14. Mendoza, Ronald U. & Canare, Tristan A. & Ang, Alvin, 2015. "Doing Business: A Review of Literature and Its Role in APEC 2015," Discussion Papers DP 2015-37, Philippine Institute for Development Studies.

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