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Judicial quality and regional firm performance: The case of Indian states

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  • Chakraborty, Pavel

Abstract

Higher quality institutions help a firm to invest in institutional-dependent inputs, which might affect a firm's performance. I use data for Indian manufacturing that matches state-by-state firm-level data with state-by-state data on particularly important institution – Judicial quality. Results show that judicial quality is a significant determinant of higher firm performance – both for exports and domestic sales. My most conservative estimate suggests that a 10% increase in judicial quality of a region helps to increase the sales of a firm by 1–2%. I explicitly control for the ‘selection’ effect by using a two-step Average Treatment Effect (ATE) procedure. The results also support my initial findings. My results are robust to a battery of robustness checks.

Suggested Citation

  • Chakraborty, Pavel, 2016. "Judicial quality and regional firm performance: The case of Indian states," Journal of Comparative Economics, Elsevier, vol. 44(4), pages 902-918.
  • Handle: RePEc:eee:jcecon:v:44:y:2016:i:4:p:902-918
    DOI: 10.1016/j.jce.2016.07.001
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    Keywords

    Judicial quality; Intermediate inputs; Firm performance; Exports; Domestic sales;

    JEL classification:

    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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