The Unequal Effect of India's Industrial Liberalization on Firms’ Decision to Innovate: Do Business Conditions Matter? |
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| Authors: | Maria Bas Caroline Paunov |
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| Institution: | 1. University of Paris 1, Centre d'Economie de la Sorbonne (CES), 116 boulevard de l'H?pital, Paris, France;2. OECD, 2, rue André Pascal, Paris, France |
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| Abstract: | Product‐market competition can boost industry growth if firms invest more in innovation. Using a natural policy experiment, the removal of India's License Raj, we show that firms in liberalized industries were 9% more likely to invest in R&D than firms in non‐liberalized industries. However, the impacts were not the same across firms of different size. After the reforms, firms in the top quartile were 23% more likely to invest in R&D than those in the lowest size quartile. Both productivity differences across firms and the heterogeneous impacts of business conditions on firms explain unequal effects of India's industrial liberalization reform. |
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