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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 raj’ - a 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 delicensing, 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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File URL: http://eprints.lse.ac.uk/3690/
File Function: Open access version.
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 3690.

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Length: 45 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:ehl:lserod:3690
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