Services Reform and Manufacturing Performance: Evidence from India

59 Pages Posted: 20 Apr 2016

See all articles by Jens Matthias Arnold

Jens Matthias Arnold

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Beata Smarzynska Javorcik

University of Oxford - Department of Economics; World Bank - Development Research Group (DECRG); Centre for Economic Policy Research (CEPR)

Molly Lipscomb

Batten School of Public Policy

Aaditya Mattoo

World Bank - Development Research Group (DECRG)

Date Written: January 1, 2012

Abstract

The growth of India's manufacturing sector since 1991 has been attributed mostly to trade liberalization and more permissive industrial licensing. This paper demonstrates thesignificant impact of a neglected factor: India's policy reforms in services. The authors examine the link between those reforms and the productivity of manufacturing firms using panel data for about 4,000 Indian firms from1993 to 2005. They find that banking, telecommunications, insurance and transport reforms all had significant, positive effects on the productivity of manufacturing firms. Services reforms benefited both foreign and locally-owned manufacturing firms, but the effects on foreign firms tended to be stronger. A one-standard-deviation increase in the aggregate index of services liberalization resulted in a productivity increase of 11.7 percent for domestic firms and 13.2 percent for foreign enterprises.

Keywords: Transport Economics Policy & Planning, Banks & Banking Reform, Emerging Markets, E-Business, Economic Theory & Research

Suggested Citation

Arnold, Jens Matthias and Javorcik, Beata Smarzynska and Lipscomb, Molly and Mattoo, Aaditya, Services Reform and Manufacturing Performance: Evidence from India (January 1, 2012). World Bank Policy Research Working Paper No. 5948. Available at SSRN: https://ssrn.com/abstract=1988036

Jens Matthias Arnold (Contact Author)

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Beata Smarzynska Javorcik

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford
United Kingdom

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
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United States
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202-522-1159 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/bjavorcik

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Molly Lipscomb

Batten School of Public Policy ( email )

235 McCormick Rd.
P.O. Box 400893
Charlottesville, VA 22904-4893
United States

Aaditya Mattoo

World Bank - Development Research Group (DECRG) ( email )

1818 H Street, N.W.
Room MC 3-327
Washington, DC 20433
United States
202-458-8047 (Phone)
202-676-9810 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/amattoo

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