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The effects of economic reforms on manufacturing dualism: Evidence from India

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  • Kathuria, Vinish
  • Rajesh Raj, S.N.
  • Sen, Kunal

Abstract

Dualism is a pervasive feature of the manufacturing sectors of less-developed countries, with large differences in productivity between the informal and the formal sectors. Policy distortions are viewed as an important factor behind the prevalence of manufacturing dualism. We examine whether tariff reforms, industrial de-licensing and the withdrawal of reservation of products for small firms implemented since the mid-1980s have had any effects on efficiency differentials between informal and formal firms in Indian manufacturing. We find strong evidence that economic reforms have exacerbated dualism by increasing the productivity differentials between the more efficient formal firms and the less efficient informal firms.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:jcecon:v:41:y:2013:i:4:p:1240-1262
    DOI: 10.1016/j.jce.2012.10.003
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    Cited by:

    1. Ghosh Dastidar, Sayantan, 2015. "Manufacturing and Trade Liberalisation of India: Continuing the Debate," MPRA Paper 61907, University Library of Munich, Germany.
    2. Ana Moreno-Monroy & Janneke Pieters & Abdul Erumban, 2014. "Formal sector subcontracting and informal sector employment in Indian manufacturing," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-17, December.
    3. repec:hur:ijarbs:v:7:y:2017:i:11:p:599-609 is not listed on IDEAS
    4. Subash Sasidharan & S. N. Rajesh Raj, 2014. "The Growth Barriers of Informal Sector Enterprises: Evidence from India," The Developing Economies, Institute of Developing Economies, vol. 52(4), pages 351-375, December.

    More about this item

    Keywords

    Reforms; Dualism; Efficiency; Formal; Informal;

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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