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The unequal effects of liberalization: evidence from dismantling the License Raj in India

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

Abstract

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.

Suggested Citation

  • Aghion, Philippe & Burgess, Robin & Redding, Stephen & Zilibotti, Fabrizio, 2006. "The unequal effects of liberalization: evidence from dismantling the License Raj in India," LSE Research Online Documents on Economics 3773, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:3773
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    More about this item

    Keywords

    delicensing; economic development; labour regulation;
    All these keywords.

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O21 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy

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