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

Aghion, Philippe; Burgess, Robin; Redding, Stephen J.; Zilibotti, Fabrizio

doi:10.2139/ssrn.1076162

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

University of Zurich Institute for Empirical Research in Economics Working Paper No. 345

34 Pages Posted: 18 Dec 2007

See all articles by Philippe Aghion

Philippe Aghion

College de France and London School of Economics and Political Science, Fellow; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Robin Burgess

London School of Economics (LSE) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Fabrizio Zilibotti

Centre for Economic Policy Research (CEPR); Yale University

There are 4 versions of this paper

Date Written: December 2007

Abstract

We study whether the effects on registered manufacturing output 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 across Indian states with different labor market regulations. In particular, following delicensing, industries located in states with proemployer labor market institutions grew more quickly than those in proworker environments.

Keywords: Distance to frontier, India, Industrial policy, Financial development, Labor regulation, Liberalization, Manufacturing, Reform

JEL Classification: J52, L11, L52, O14, O24, O47, O53, P41

Suggested Citation: Suggested Citation

Aghion, Philippe and Burgess, Robin and Redding, Stephen J. and Zilibotti, Fabrizio and Zilibotti, Fabrizio, The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India (December 2007). University of Zurich Institute for Empirical Research in Economics Working Paper No. 345, Available at SSRN: https://ssrn.com/abstract=1076162 or http://dx.doi.org/10.2139/ssrn.1076162