In with the Big, Out with the Small: Removing Small-Scale Reservations in India

66 Pages Posted: 3 Mar 2014 Last revised: 31 Mar 2014

See all articles by Leslie A. Martin

Leslie A. Martin

University of Melbourne - Department of Economics

Shanthi Nataraj

RAND Corporation

Ann E. Harrison

University of California, Berkeley; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2014

Abstract

An ongoing debate in employment policy is whether promoting small and medium enterprises creates more employment. Do small enterprises generate more employment growth than larger firms? We use the elimination of small-scale industry (SSI) promotion in India to address this question. For 60 years, SSI promotion in India focused on reserving certain products for manufacture by small and medium establishments. We identify the consequences for employment growth, investment, output, productivity, and wages of dismantling India’s SSI reservations. We exploit variation in the timing of de-reservation across products; our identification strategy is also robust to measuring the long-run impact of national SSI policy changes using variation in pre-treatment exposure at the district level, and to conducting placebo tests using products that were never de-reserved. Districts more exposed to de-reservation experienced higher employment and wage growth. The results suggest that promoting employment growth in the Indian case was not achieved via SSI reservation policies.

Suggested Citation

Martin, Leslie A. and Nataraj, Shanthi and Harrison, Ann E., In with the Big, Out with the Small: Removing Small-Scale Reservations in India (September 2014). NBER Working Paper No. w19942. Available at SSRN: https://ssrn.com/abstract=2403666

Leslie A. Martin (Contact Author)

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

HOME PAGE: http://lesliemartin.org

Shanthi Nataraj

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States
310-393-0411 (Phone)

HOME PAGE: http://www.rand.org/

Ann E. Harrison

University of California, Berkeley ( email )

Giannini Hall
Berkeley, CA 94720-3880
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
8
Abstract Views
218
PlumX Metrics