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The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India

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

Abstract

This paper investigates whether the effects, on registered manufacturing output, 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 labour 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 labour 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 & Zilibotti, Fabrizio & Redding, Stephen, 2006. "The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India," CEPR Discussion Papers 5492, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:5492
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    More about this item

    Keywords

    Delicensing; Labour regulation; Economic development;
    All these keywords.

    JEL classification:

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

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