Entry Liberalization and Inequality in Industrial Performance

By Philippe Aghion, Robin Burgess, S. Redding, Fabrizio Zilibotti. 2005

247 citations recorded by the source corpus.

Industrial delicensing, which began in 1985 in India marked a discrete break from a past of centrally planned industrial development. Similar liberalization episodes are taking place across the globe. We develop a simple Schumpeterian growth model to understand how firms respond to the entry threat imposed by liberalization. The model emphasizes that firm responses, even within the same industrial sector, are likely to be heterogeneous leading to an increase in within industry inequality. Technologically advanced firms and those located in regions with pro-business institutions are more likely to respond to the threat of entry by investing in new technologies and production processes. Empirical analysis using a panel of three-digit stateindustry data from India for the period 1980–1997 confirms that delicensing led to an increase in within industry inequality in industrial performance. (JEL: F14, 012, 031)

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/0a5f6cfd0fb77276d6d066a0fe0c4d4b79bb36db

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Citations in the corpus

International Trade and the Gender Wage Gap: New Evidence from India’s Manufacturing Sector (2009, background): “Findings in Aghion et al. (2005) indicate that local policies and institutional settings played an important role in the reallocation of manufacturing production across regions in India.”
Competition and the Welfare Gains from Transportation Infrastructure: Evidence from the Golden Quadrilateral of India (2018, unknown): “See for instance Aghion et al. (2005), Aghion et al. (2008), Chari (2011), Hsieh and Klenow (2009), and Bollard, Klenow, and Sharma (2013).”
Trade Liberalization and Firm Productivity: The Case of India (2004, unknown): “Going beyond this reallocation effect of trade liberalization, Aghion et al. (2005) suggest another mechanism through which liberalization might affect productivity: the increased threat of competition raises the innovation incentives by domestic producers as they seek to deter entry by foreign comp”
Appropriate growth policy: a unifying framework (2006, methodology): “and workers; indeed increased exit in this model can do nothing but reduce the economy’s GDP, by reducing the variety variable Nt that uniquely determines aggregate productivity according to the production function (8).”
Innovation by entrants and incumbents (2015, unknown): “…with lower quality invest more because of the threat of entry by imitation.25 This threat also makes the radical innovation (creative destruction) 25This is similar to the escape competition e¤ect in Aghion et al. (2001), Aghion et al. (2005a) and Acemoglu and Akcigit (2006). less pro table.”
Barriers to Competition and Productivity: Evidence from India (2009, background): “Nagaraj (1999) highlights three other shortcomings of the ASI data: (1) incomplete coverage of factories, (2) under-reporting of workers in factories covered, especially in small factories, and (3) under-reporting of value added.”
The Arrival of Fast Internet and Employment in Africa (2019, background): “…Internet appears to increase both the share of skilled jobs and average incomes in Africa, and technological change for identification, including Harrison & Hanson (1999); Acemoglu (2003); Attanasio et al. (2004); Aghion et al. (2005); Amiti & Cameron (2012); Frazer (2013); Raveh & Reshef (2016).”
India's Patterns of Development: What Happened, What Follows (2006, unknown): “22 This is consistent with the findings in Aghion et al. (2005) who show that states that were closest to the technological frontier were the ones that benefited most from the reforms of the early 1990s.”
The Effects of Entry on Incumbent Innovation and Productivity (2005, methodology): “Aghion et al. (2005b, 2006) use state-industry panel data instead of plant or ﬁrm panel data to investigate how the effectiveness of the Indian liberalization reform depends on the technological and institutional state-industry environment, in particular labor market regulation.”
India's Pattern of Development: What Happened, What Follows? (2006, unknown): “In the figure, we plot the Herfindahl coefficient of concentration within manufacturing in the different states in the early 1980s against the subsequent overall growth 24 This is consistent with the findings in Aghion et al. (2005) who show that states that were closest to the technological frontie”
India's Mysterious Manufacturing Miracle (2011, background): “De-licensing also appeared to raise the demand for skilled labor in Indian industry (Chamarbagwalla & Sharma (2008)), and may have contributed to growth differences across regions (Aghion et al. (2005) and Aghion et al. (2008)).”