The Employment Effect of Place-Based Policies : Evidence from India
Many governments in developing countries have pursued policies targeting specific geographic areas over the past several decades. However, only a few have rigorously evaluated the causal impact of these interventions. This paper examines the effect...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/785411605819935532/The-Employment-Effect-of-Place-Based-Policies-Evidence-from-India http://hdl.handle.net/10986/34832 |
| Summary: | Many governments in developing countries
have pursued policies targeting specific geographic areas
over the past several decades. However, only a few have
rigorously evaluated the causal impact of these
interventions. This paper examines the effectiveness of a
prominent place-based policy in India: the centrally
sponsored New Industrial Policy for the state of
Uttarakhand. Using georeferenced economic census data, the
analysis applies a boundary discontinuity research design
and zones in on the unique border between Uttarakhand and
Uttar Pradesh, two states that were officially one before
the implementation of the New Industrial Policy. The
findings show that there was a significant and abrupt
increase in employment at the town and village level when
crossing the state border from Uttar Pradesh to Uttarakhand
after the full implementation of the New Industrial Policy.
The conclusion even holds for firms within the same sector.
The increase is mainly due to larger firm sizes and
expansions into new industries. A main component of the New
Industrial Policy was excise tax incentives for certain
industries. The paper finds that the increase in
cross-border employment is higher for sectors receiving
excise tax incentives than others. Additionally, exploring
spillovers between industries, the paper shows that,
controlling for the direct effects, the sectors with labor
requirements similar to those receiving excise tax
incentives also experience an increase in employment.
Finally, the growth in the number of firms in Uttar Pradesh
close to the border remained stable before and after the New
Industrial Policy, which suggests the results are not fully
driven by firms relocating from Uttar Pradesh to Uttarakhand. |
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