In with the Big, Out with the Small: Removing Small-Scale Reservations in India

• 成果类型: Article
• 署名作者: Martin, Leslie A.; Nataraj, Shanthi; Harrison, Ann E.
• 署名单位: University of Melbourne; RAND Corporation; University of Pennsylvania; National Bureau of Economic Research
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20141335
• 发表日期: 2017
• 页码: 354-386
• 关键词: firm growth; developing-countries; liberalization evidence; Manufacturing sector; productivity growth; multiproduct firms; Small enterprises; UNITED-STATES; size; ECONOMY

摘要

An ongoing debate in employment policy is whether promoting small and medium enterprises creates jobs. We use the elimination of small-scale industry (SSI) promotion in India to address this question. For 60 years, SSI promotion in India focused on reserving certain products for manufacture by small and medium enterprises. We identify the consequences for employment growth, investment, output, productivity, and wages of dismantling India's SSI reservations. We exploit variation in the timing of de-reservation across products and also measure the long-run impact of national SSI policy changes using variation in pretreatment exposure at the district level. Districts more exposed to de-reservation experienced higher employment and output growth. Entrants into the de-reserved product spaces and incumbents that were previously constrained by the size restrictions drove the increase in growth. The results suggest that dismantling India's SSI policies encouraged overall employment growth.