Welfare effects of industrial policies: Theory and evidence from India's de-reservation policy

Victor Gimenez-Perales and Alina Mulyukova

No 2299, Kiel Working Papers from Kiel Institute for the World Economy

Abstract: We study how industrial policies affect welfare depending on firms' management practices. In a model of multi-product firms, we show that firms with better management practices are less adversely affected by an industrial policy that fosters market entry and competition. This result follows from firms with better management practices specializing in fewer products with lower marginal costs. Evidence from India's de-reservation policy supports these predictions. Our simulations estimate a 0.29% welfare gain in India from the policy. The same policy could increase welfare by 0.39% in an environment with better management practices, such as those in the US.

Keywords: industrial policies; management practices; multi-product firms; de-reservation policy (search for similar items in EconPapers)
JEL-codes: D24 F10 L25 O12 O25 (search for similar items in EconPapers)
Date: 2026, Revised 2026
New Economics Papers: this item is included in nep-com, nep-reg and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:325492

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