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

Leslie Martin (), Shanthi Nataraj and Ann Harrison

No 19942, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: An ongoing debate in employment policy is whether promoting small and medium enterprises creates more employment. Do small enterprises generate more employment growth than larger firms? 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 establishments. 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; our identification strategy is also robust to measuring the long-run impact of national SSI policy changes using variation in pre-treatment exposure at the district level, and to conducting placebo tests using products that were never de-reserved. Districts more exposed to de-reservation experienced higher employment and wage growth. The results suggest that promoting employment growth in the Indian case was not achieved via SSI reservation policies.

JEL-codes: O12 O25 O38 (search for similar items in EconPapers)
Date: 2014-09
Note: DEV ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

Published as Leslie A. Martin & Shanthi Nataraj & Ann E. Harrison, 2017. "In with the Big, Out with the Small: Removing Small-Scale Reservations in India," American Economic Review, American Economic Association, vol. 107(2), pages 354-386, February.

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Journal Article: In with the Big, Out with the Small: Removing Small-Scale Reservations in India (2017)
Working Paper: In with the Big, Out with the Small Removing Small-Scale Reservations in India (2014)
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