Working Paper: NBER ID: w17514
Authors: Ejaz Ghani; William R. Kerr; Stephen D. O'Connell
Abstract: We analyze the spatial determinants of entrepreneurship in India in the manufacturing and services sectors. Among general district traits, quality of physical infrastructure and workforce education are the strongest predictors of entry, with labor laws and household banking quality also playing important roles. Looking at the district-industry level, we find extensive evidence of agglomeration economies among manufacturing industries. In particular, supportive incumbent industrial structures for input and output markets are strongly linked to higher establishment entry rates. We also find substantial evidence for the Chinitz effect where small local incumbent suppliers encourage entry. The importance of agglomeration economies for entry hold when considering changes in India's incumbent industry structures from 1989, determined before large-scale deregulation began, to 2005.
Keywords: Entrepreneurship; India; Agglomeration Economies; Infrastructure; Education
JEL Codes: L10; L26; L60; L80; M13; O10; R00; R10; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher levels of education in a district (I24) | Entry rates of new establishments (L26) |
| Quality physical infrastructure (R53) | New business entry (M13) |
| Strict labor regulations (J89) | Entry rates in organized manufacturing sector (L69) |
| Presence of incumbent firms (L19) | New firm entry (L26) |
| Small local suppliers (L81) | New business entry (M13) |