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Judicial Quality and Regional Firm Performance: The Case of Indian States

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<mark>Journal publication date</mark>11/2016
<mark>Journal</mark>Journal of Comparative Economics
Issue number4
Number of pages17
Pages (from-to)902-918
Publication statusPublished
Early online date4/07/16
Original languageEnglish


Higher quality institutions help a firm to invest in institutional-dependent inputs, which might affect a firm's performance. I use data for Indian manufacturing that matches state-by-state firm-level data with state-by-state data on particularly important institution – Judicial quality. Results show that judicial quality is a significant determinant of higher firm performance – both for exports and domestic sales. My most conservative estimate suggests that a 10% increase in judicial quality of a region helps to increase the sales of a firm by 1–2%. I explicitly control for the ‘selection’ effect by using a two-step Average Treatment Effect (ATE) procedure. The results also support my initial findings. My results are robust to a battery of robustness checks.