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Entry liberalization and inequality in industrial performance

Aghion, P.; Burgess, R.; Redding, S.; Zilibotti, F.; (2005) Entry liberalization and inequality in industrial performance. Journal of the European Economic Association , 3 (2-3) pp. 291-302. 10.1162/jeea.2005.3.2-3.291. Green open access

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Industrial delicensing, which began in 1985 in India marked a discrete break from a past of centrally planned industrial development. Similar liberalization episodes are taking place across the globe. We develop a simple Schumpeterian growth model to understand how firms respond to the entry threat imposed by liberalization. The model emphasizes that firm responses, even within the same industrial sector, are likely to be heterogeneous leading to an increase in within industry inequality. Technologically advanced firms and those located in regions with pro-business institutions are more likely to respond to the threat of entry by investing in new technologies and production processes. Empirical analysis using a panel of three-digit state industry data from India for the period 1980–1997 confirms that delicensing led to an increase in within industry inequality in industrial performance.

Type: Article
Title: Entry liberalization and inequality in industrial performance
Open access status: An open access version is available from UCL Discovery
DOI: 10.1162/jeea.2005.3.2-3.291
Publisher version: http://dx.doi.org/10.1162/jeea.2005.3.2-3.291
Language: English
Additional information: © 2005 The MIT Press
Keywords: Development
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/17749
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