Entry Liberalization and Inequality in Industrial Performance
Industrial delicensing, which began in 1985 in India marked a discrete break from a past of centrally planned industrial development. Similar liberalization episodes are taking place across the globe. We develop a simple Schumpeterian growth model to understand how firms respond to the entry threat imposed by liberalization. The model emphasizes that firm responses, even within the same industrial sector, are likely to be heterogeneous leading to an increase in within industry inequality. Technologically advanced firms and those located in regions with pro-business institutions are more likely to respond to the threat of entry by investing in new technologies and production processes. Empirical analysis using a panel of three-digit state industry data from India for the period 1980-1997 confirms that delicensing led to an increase in within industry inequality in industrial performance. (JEL: F14, 012, 031) Copyright (c) 2005 The European Economic Association.
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Volume (Year): 3 (2005)
Issue (Month): 2-3 (04/05)
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References listed on IDEAS
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.:
- Nina Pavcnik, 2002.
"Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants,"
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- Dani Rodrik & Arvind Subramanian, 2004. "From "Hindu Growth" to Productivity Surge: The Mystery of the Indian Growth Transition," NBER Working Papers 10376, National Bureau of Economic Research, Inc.
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