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The impact of business environment and economic geography on plant-level productivity : an analysis of Indian industry


  • Lall, Somik V.
  • Mengistae, Taye


The authors'analysis of manufacturing plants sampled from India's major industrial centers shows large productivity gaps across cities. The gaps partly reflect differences in agglomeration economies and in market access. However, they are also explained to a greater extent by differences in the degree of labor regulation and in the severity of power shortages. This is an indication that governments can help narrow regional disparities in industrial growth by fostering the"right business environment"in locations where industry might otherwise be held back by powerful forces of economic geography. There is indeed a pattern in the data whereby geographically disadvantaged cities seem to compensate partially for their natural disadvantage by having a better business environment than more geographically advantaged locations.

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  • Lall, Somik V. & Mengistae, Taye, 2005. "The impact of business environment and economic geography on plant-level productivity : an analysis of Indian industry," Policy Research Working Paper Series 3664, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3664

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    1. Somik Vinay Lall & Sanjoy Chakravorty, 2005. "Industrial Location and Spatial Inequality: Theory and Evidence from India," Review of Development Economics, Wiley Blackwell, vol. 9(1), pages 47-68, February.
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    Cited by:

    1. Nidhiya Menon, 2010. "Got Technology? The Impact of Computers and Cell-phones on Productivity in a Difficult Business Climate: Evidence from Firms with Female Owners in Kenya," Working Papers 21, Brandeis University, Department of Economics and International Businesss School.
    2. Somik V. Lall & Elizabeth Schroeder & Emily Schmidt, 2014. "Identifying Spatial Efficiency-Equity Trade-offs in Territorial Development Policies: Evidence from Uganda," Journal of Development Studies, Taylor & Francis Journals, vol. 50(12), pages 1717-1733, December.
    3. Nidhiya Menon, 2010. "Obstacles to Business, Technology Use, and Firms with Female Principal Owners in Kenya," Working Papers 20, Brandeis University, Department of Economics and International Businesss School.
    4. Sridhar, Kala Seetharam & Wan, Guanghua, 2010. "Firm location choice in cities: Evidence from China, India, and Brazil," China Economic Review, Elsevier, vol. 21(1), pages 113-122, March.
    5. repec:rom:terumm:v:12:y:2017:i:3:p:45-62 is not listed on IDEAS
    6. Ahsan, Ahmad & Pagés, Carmen, 2009. "Are all labor regulations equal? Evidence from Indian manufacturing," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 62-75, March.
    7. Kinda, Tidiane, 2010. "Investment Climate and FDI in Developing Countries: Firm-Level Evidence," World Development, Elsevier, vol. 38(4), pages 498-513, April.
    8. Nidhiya Menon, 2015. "Gender And Technology Use In Developing Countries: Evidence From Firms In Kenya," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 40(3), pages 105-140, September.
    9. Ghani, Ejaz & Goswami, Arti Grover & Kerr, William R., 2014. "Spatial dynamics of electricity usage in India," Policy Research Working Paper Series 7055, The World Bank.
    10. Tripathi, Sabyasachi & Kumar, Shamika, 2016. "Determinants of firm location choice in metropolitan cities in India: A binary Logit model analysis," MPRA Paper 73995, University Library of Munich, Germany.
    11. Joshi, Deepika & Nepal, Bimal & Rathore, Ajay Pal Singh & Sharma, Dipti, 2013. "On supply chain competitiveness of Indian automotive component manufacturing industry," International Journal of Production Economics, Elsevier, vol. 143(1), pages 151-161.
    12. Dirk Holtbrügge & Carina B. Friedmann, 2016. "Does location choice affect foreign subsidiary success in India? An empirical study based on Porter's diamond model," International Journal of Business and Emerging Markets, Inderscience Enterprises Ltd, vol. 8(1), pages 3-29.

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