The Unequal Effects of Liberalization: Evidence fromDismantling the License Raj in India

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  • 1 January 2005
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      • Published in RePEc
Abstract
This paper investigates whether the effects, on registered manufacturing out-put,employment, entry and investment, of dismantling the 'license raj' - a system of centralcontrols regulating entry and production activity in this sector - vary across Indian stateswith different labor market regulations. The effects are found to be unequal depending onthe institutional environment in which industries are embedded. In particular, followingdelicensing, industries located in states with pro-employer labor market institutions grewmore quickly than those in pro-worker environments. Our results emphasize how localinstitutions matter for whether industry in a region benefits or is harmed by thenationwide delicensing reform.
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