Deregulation, Misallocation, and Size: Evidence from India / Laura Alfaro, Anusha Chari.

Format:

Book

Author/Creator:

Alfaro, Laura.

Contributor:

National Bureau of Economic Research.

Chari, Anusha.

Series:

Working Paper Series (National Bureau of Economic Research) no. w18650.

NBER working paper series no. w18650

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

This paper examines the impact of the deregulation of compulsory industrial licensing in India on firm-size dynamics and the reallocation of resources within industries over time. Following deregulation, we find that the extent of resource misallocation declines and a considerable thickening of the left-hand tail of the firm-size distribution suggesting a significant increase in the number of small firms. However, the dominance and growth of large incumbents remains unchallenged. Quantile regressions reveal that the distributional effects of deregulation on firm size are significantly non-linear. The size distribution we observe--namely, a large number of small firms and a small number of large firms--can be characterized as the "missing middle" in Indian manufacturing and suggests that small firms may continue to face constraints in their attempts to grow.

Notes:

Print version record

December 2012.