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Discrimination or Social Networks? Industrial Investment in Colonial India

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  • Gupta, Bishnupriya

Abstract

Industrial investment in colonial India was segregated by the export industries, such as tea and jute that relied on British firms and the import substituting cotton textile industry that was dominated by Indian firms. Empirical evidence in this article does not suggest that barriers to entry faced by Indian entrepreneurs created this separation. Informational asymmetry played an important role. British entrepreneurs knew the export markets and the Indian entrepreneurs were familiar with local markets. Conditional on the initial advantage in entry, social network effects determined subsequent entry of firms by ethnicity and created separate spheres of industrial investment.

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  • Gupta, Bishnupriya, 2014. "Discrimination or Social Networks? Industrial Investment in Colonial India," The Journal of Economic History, Cambridge University Press, vol. 74(1), pages 141-168, March.
    • Handle: RePEc:cup:jechis:v:74:y:2014:i:01:p:141-168_00
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    1. Gani Aldashev & Catherine Guirkinger, 2016. "Colonization and Changing Social Structure: Kazakhstan 1896-1910," Working Papers ECARES ECARES 2016-10, ULB -- Universite Libre de Bruxelles.
    2. Chaudhary, Latika & Swamy, Anand V., 2017. "Protecting the borrower: An experiment in colonial India," Explorations in Economic History, Elsevier, vol. 65(C), pages 36-54.
    3. Munshi, K., 2017. "Caste and the Indian Economy," Cambridge Working Papers in Economics 1759, Faculty of Economics, University of Cambridge.
    4. Alvaredo, Facundo & Bergeron, Augustin & Cassan, Guilhem, 2017. "Income concentration in British India, 1885–1946," Journal of Development Economics, Elsevier, vol. 127(C), pages 459-469.
    5. Aldashev, Gani & Guirkinger, Catherine, 2017. "Colonization and changing social structure: Evidence from Kazakhstan," Journal of Development Economics, Elsevier, vol. 127(C), pages 413-430.
    6. Bishnupriya Gupta & Dilip Mookherjee & Kaivan Munshi & Mario Sanclemente, 2018. "Community Origins of Industrial Entrepreneurship in Pre-Independence India," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-318, Boston University - Department of Economics.
    7. Esteves, Rui & Geisler Mesevage, Gabriel, 2019. "Social Networks in Economic History: Opportunities and Challenges," Explorations in Economic History, Elsevier, vol. 74(C).

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