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Structural Transformation and Spillovers from Industrial Areas

David Blakeslee (), Ritam Chaurey (), Ram Fishman () and Samreen Malik ()
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David Blakeslee: New York University, Abu Dhabi
Ritam Chaurey: The Johns Hopkins Carey Business School
Ram Fishman: Tel Aviv University
Samreen Malik: New York University, Abu Dhabi

No 11886, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Like many developing countries, India features a variety of land-use restrictions that make it difficult to establish industrial firms on agricultural lands. Such policies have received some of the blame for the slow pace of industrialization, and there is widespread agreement on the need for reform. Traditional agrarian economies, however, have many features that may serve as barriers to industrialization, making it unclear that land-use reform would be sufficient for promoting manufacturing growth in rural areas. To better understand the role played by such regulations, we study the effects of the Industrial Areas (IAs) program in India, which facilitated the establishment of industrial firms in areas that had previously been restricted to agriculture. We find that IAs caused a large increase in the number of firms and employment, and that there were substantial spillovers to neighboring villages. Furthermore, IAs trigger a classic "structural transformation" of the economy, with a shift of workers from agricultural to non-agricultural employment, and the creation of numerous small manufacturing and agricultural firms.

Keywords: industrial areas; spillovers; labor market (search for similar items in EconPapers)
JEL-codes: O12 O25 R2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev and nep-geo
Date: 2018-10
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