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The effects of economic reforms on manufacturing dualism: Evidence from India

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  • Kathuria, Vinish
  • Rajesh Raj, S.N.
  • Sen, Kunal

Abstract

Dualism is a pervasive feature of the manufacturing sectors of less-developed countries, with large differences in productivity between the informal and the formal sectors. Policy distortions are viewed as an important factor behind the prevalence of manufacturing dualism. We examine whether tariff reforms, industrial de-licensing and the withdrawal of reservation of products for small firms implemented since the mid-1980s have had any effects on efficiency differentials between informal and formal firms in Indian manufacturing. We find strong evidence that economic reforms have exacerbated dualism by increasing the productivity differentials between the more efficient formal firms and the less efficient informal firms.

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  • Kathuria, Vinish & Rajesh Raj, S.N. & Sen, Kunal, 2013. "The effects of economic reforms on manufacturing dualism: Evidence from India," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1240-1262.
    • Handle: RePEc:eee:jcecon:v:41:y:2013:i:4:p:1240-1262
    DOI: 10.1016/j.jce.2012.10.003
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    2. Jude Kenechi Onyima & Nkechi Cordelia Ojiagu, 2017. "Digital Technology and Formalization of informal Businesses: A case of African Traditional Spiritualists," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 7(11), pages 599-609, November.
    3. Mukherjee, Soumyatanu & Zafar, Sameen, 2014. "Technological progress with segmented factor markets and welfare implications for the urban poor," MPRA Paper 55297, University Library of Munich, Germany.
    4. Golam Rabbani & S N Rajesh Raj, 2024. "The role of financial constraints in firm transition—Evidence from Indian manufacturing," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(4), pages 2193-2228, May.
    5. Rajesh Raj Natarajan & Kunal Sen, 2024. "Behind the numbers: exploring caste inequities in entrepreneurial success," WIDER Working Paper Series wp-2024-4, World Institute for Development Economic Research (UNU-WIDER).
    6. Kausik Chaudhuri & S. N Rajesh Raj & Subash Sasidharan, 2018. "Broadband Adoption and Firm Performance: Evidence from Informal Sector Firms in India," Working Papers id:12744, eSocialSciences.
    7. Nihar Shembavnekar, 2018. "Did India’s economic reforms generate jobs? Essays on economic liberalisation, labour market flexibility and employment in the Indian manufacturing sector (1990-2006)," Economics PhD Theses 0917, Department of Economics, University of Sussex Business School.
    8. Ghosh Dastidar, Sayantan, 2015. "Manufacturing and Trade Liberalisation of India: Continuing the Debate," MPRA Paper 61907, University Library of Munich, Germany.
    9. Subash Sasidharan & S. N. Rajesh Raj, 2014. "The Growth Barriers of Informal Sector Enterprises: Evidence from India," The Developing Economies, Institute of Developing Economies, vol. 52(4), pages 351-375, December.
    10. Ana Moreno-Monroy & Janneke Pieters & Abdul Erumban, 2014. "Formal sector subcontracting and informal sector employment in Indian manufacturing," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-17, December.
    11. Vinish Kathuria, 2019. "Growth and Investment: Testing for the Relationship for South Asian Countries," Millennial Asia, , vol. 10(3), pages 337-371, December.
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    More about this item

    Keywords

    Reforms; Dualism; Efficiency; Formal; Informal;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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