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

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

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

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File URL: http://sticerd.lse.ac.uk/dps/de/DEDPS45.pdf
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Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers with number 45.

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Date of creation: Dec 2005
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Handle: RePEc:cep:stidep:45
Contact details of provider: Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp

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