The Effects of Economic Reforms on Manufacturing Dualism: Evidence from India

Vinish Kathuria, Rajesh Raj, Kunal Sen

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Abstract

Dualism is a pervasive feature of the manufacturing sectors of less-developed countries, with large differences in productivity between the informal and the formal sectors. Policy distortions are viewed as an important factor behind the prevalence of manufacturing dualism. We examine whether tariff reforms, industrial de-licensing and the withdrawal of reservation of products for small firms implemented since the mid-1980s have had any effects on efficiency differentials between informal and formal firms in Indian manufacturing. We find strong evidence that economic reforms have exacerbated dualism by increasing the productivity differentials between the more efficient formal firms and the less efficient informal firms. © 2012 Association for Comparative Economic Studies.
Original languageEnglish
Pages (from-to)1240-1262
Number of pages22
JournalJournal of Comparative Economics
Volume41
Issue number4
DOIs
Publication statusPublished - Nov 2013

Keywords

  • Dualism
  • Efficiency
  • Formal
  • Informal
  • Reforms

Research Beacons, Institutes and Platforms

  • Global Development Institute

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