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The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India

  • Philippe Aghion
  • Robin Burgess
  • Stephen Redding
  • Fabrizio Zilibotti

This paper investigates whether the effects, on registered manufacturing out- put, employment, entry and investment, of dismantling the .license raja system of central controls regulating entry and production activity in this sector .vary across Indian states with different labor market regulations. The effects are found to be unequal depending on the institutional environment in which industries are embedded. In particular, following de-licensing, industries located in states with pro-employer labor market institutions grew more quickly than those in pro-worker environments. Our results emphasize how local institutions matter for whether industry in a region benefits or is harmed by the nationwide delicensing reform.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0728.

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Date of creation: Jun 2006
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Handle: RePEc:cep:cepdps:dp0728
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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