Journal article

In with the Big, Out with the Small: Removing Small-Scale Reservations in India

Leslie A Martin, Shanthi Nataraj, Ann E Harrison



An ongoing debate in employment policy is whether promoting small and medium enterprises creates jobs. We use the elimination of small- scale industry (SSI) promotion in India to address this question. For 60 years, SSI promotion in India focused on reserving certain products for manufacture by small and medium enterprises. We identify the consequences for employment growth, investment, output, productivity, and wages of dismantling India's SSI reservations. We exploit variation in the timing of de- reservation across products and also measure the long- run impact of national SSI policy changes using variation in pretreatment exposure at the district level. Districts more exposed to de- rese..

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University of Melbourne Researchers


Awarded by National Science Foundation

Funding Acknowledgements

We thank Mr. M. L. Philip, Mr. P. C. Nirala, Dr. Praveen Shukla, and Mr. M. M. Hasija at the Ministry of Statistics and Programme Implementation for their assistance in obtaining and interpreting the ASI data, and David Nelson and Steve Otto for assisting in matching the product reservation codes with the ASICC codes. We are grateful to Richard Freeman, David Neumark, and Jeff Wenger, as well as seminar participants at the 2016 ASSA Annual Meeting, Harvard, the London School of Economics, RAND, and the Wharton International Lunch for their valuable comments. We are also grateful to the three referees for their very helpful suggestions, which greatly improved the paper. This material is based upon work supported by the National Science Foundation under grant no. SES-0922332. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of the National Science Foundation. Leslie Martin and Ann Harrison declare that they have no relevant or material financial interests that relate to the research described in this paper. Shanthi Nataraj has received funding for other research projects from the World Bank and the UK Department for International Development.