Deregulation, misallocation, and size
Subtitle: evidence from India / Laura Alfaro, Anusha Chari
Contributors: Chari, Anusha, 1969- author; Harvard Business School
Series: Working paper / Harvard Business School -- 13-056; Working paper (Harvard Business School) -- 13-056
Publisher: Harvard Business School
Published: 2012
Place of publication: Boston]
Language: eng
Number of pages: 50
Description: This paper examines the impact of the deregulation of compulsory industrial licensing in India on firm-size dynamics and the reallocation of resources within industries over time. Following deregulation, we find that the extent of resource misallocation declines and a considerable thickening of the left-hand tail of the firm-size distribution suggesting a significant increase in the number of small firms. However, the dominance and growth of large incumbents remains unchallenged. Quantile regressions reveal that the distributional effects of deregulation on firm size are significantly non-linear. The size distribution we observe--namely, a large number of small firms and a small number of large firms--can be characterized as the "missing middle" in Indian manufacturing and suggests that small firms may continue to face constraints in their attempts to grow.
Notes: "December 2012"--Publisher's Web site.

Includes bibliographical references (pages 36-39).