Deregulation, Misallocation, and Size: Evidence from India

Laura Alfaro and Anusha Chari

No 13-056, Harvard Business School Working Papers from Harvard Business School

Abstract: This paper examines the impact of the deregulation of compulsory industrial licensing in India on firm size dynamics and reallocation of resources within industries. Following deregulation, resource misallocation declines and the left-hand tail of the firm size distribution thickens significantly, suggesting increased entry by 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 reallocation of market shares toward a small number of large firms and a large number of small firms is characterized as the "shrinking middle" in Indian manufacturing. Small- and medium-sized firms may continue to face constraints in their attempts to grow.

JEL-codes: F43 G31 G38 L10 O12 O14 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2012-12, Revised 2014-02
References: Add references at CitEc
Citations: View citations in EconPapers (22)

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Related works:
Journal Article: Deregulation, Misallocation, and Size: Evidence from India (2014)
Working Paper: Deregulation, Misallocation, and Size: Evidence from India (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:hbs:wpaper:13-056

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