Ignoring multi-plants in Indian industry data leads to measurement error, masking the true size and evolution of large firms.
Authors
Abhishek Anand, Madras Institute of Development Studies, Chennai, Tamil Nadu, India
Arvind Subramanian, Peterson Institute for International Economics, Washington DC, USA
Naveen Joseph Thomas, Associate Professor, Jindal School of Government and Public Policy, O.P. Jindal Global University, Sonipat, Haryana, India
Summary
Nearly all the literature using the Annual Survey of Industries (ASI) data in India has overlooked or not seriously incorporated the phenomenon of multi-plants, whereby a firm sets up multiple production facilities within a state. We show that multi-plants have grown dramatically over time, now accounting for 36 percent of employment in large firms (greater than 200 workers). The multi-plant phenomenon is important because it changes our understanding of the evolution of the size of large firms: contrary to recent research we find that accounting for multi-plants shows that large plants have not grown in size (and may even have shrunk) despite increasing recourse to contract labour. More broadly, any literature that focusses on firm size distribution without accounting for the multi-plant phenomenon is prone to measurement error.
Published in: Journal of Development Economics
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