Working Paper: CEPR ID: DP5492
Authors: Philippe Aghion; Robin Burgess; Stephen J. Redding; Fabrizio Zilibotti
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.
Keywords: delicensing; economic development; labor regulation
JEL Codes: O14; O18; O21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| delicensing reform (L51) | industrial performance (L69) |
| labor market institutions (J08) | industrial performance (L69) |
| pro-employer labor market institutions (J08) | industrial performance (L69) |
| pro-worker labor market institutions (J08) | industrial performance (L69) |
| delicensing reform + pro-employer labor market institutions (J08) | increased output (E23) |
| delicensing reform + pro-employer labor market institutions (J08) | increased employment (J68) |
| delicensing reform + pro-employer labor market institutions (J08) | increased investment (E22) |
| delicensing reform + pro-worker labor market institutions (J08) | decline in industrial performance (L16) |