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Structural Transformation and Spillovers from Industrial Areas

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  • Blakeslee, David

    () (New York University, Abu Dhabi)

  • Chaurey, Ritam

    () (The Johns Hopkins Carey Business School)

  • Fishman, Ram

    () (Tel Aviv University)

  • Malik, Samreen

    () (New York University, Abu Dhabi)

Abstract

Like many developing countries, India features a variety of land-use restrictions that make it difficult to establish industrial firms on agricultural lands. Such policies have received some of the blame for the slow pace of industrialization, and there is widespread agreement on the need for reform. Traditional agrarian economies, however, have many features that may serve as barriers to industrialization, making it unclear that land-use reform would be sufficient for promoting manufacturing growth in rural areas. To better understand the role played by such regulations, we study the effects of the Industrial Areas (IAs) program in India, which facilitated the establishment of industrial firms in areas that had previously been restricted to agriculture. We find that IAs caused a large increase in the number of firms and employment, and that there were substantial spillovers to neighboring villages. Furthermore, IAs trigger a classic "structural transformation" of the economy, with a shift of workers from agricultural to non-agricultural employment, and the creation of numerous small manufacturing and agricultural firms.

Suggested Citation

  • Blakeslee, David & Chaurey, Ritam & Fishman, Ram & Malik, Samreen, 2018. "Structural Transformation and Spillovers from Industrial Areas," IZA Discussion Papers 11886, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp11886
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    More about this item

    Keywords

    industrial areas; spillovers; labor market;

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

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