The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India
44 Pages Posted: 4 May 2006 Last revised: 2 Jul 2009
Date Written: February 2006
We study the effects of the progressive elimination of the system of industrial regulations on entry and production, known as the "license raj," on registered manufacturing output, employment, entry and investment across Indian states with different labor 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 labor market institutions grew more quickly than those in pro-worker environments.
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