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The Impact of the De-reservation of Small-Scale Industries on Informal Employment, Poverty and Residential Outcomes in Urban India

Authors: Aarti Reddy*, American University
Topics: Development, Asia
Keywords: Informal Labour, Residential outcomes, India, Urban
Session Type: Paper
Presentation File: No File Uploaded

The overlap between people employed informally and people living in informal settlements in urban India is well documented, but more research is needed to understand its causes and contribution to urban poverty traps. This paper attempts to shed light on the causal link between informal employment and residential conditions. It uses a national policy - the de-reservation of Small-Scale Industries - that generated a series of quasi-random shocks to employment, to estimate how changes in individuals’ employment type and conditions, affect poverty and residential outcomes. While the empirical strategy is similar to Tewari (2012) and Martin et al. (2017), this paper focuses on informal employment rather than formal employment, output and productivity. Additionally, it attempts to examine how changes in conditions of informal employment consequently affect households’ residential conditions. The key contributions of this paper are as follows. First, it isolates the effects of de-reservation on informal employment by accounting for informal employment in the supply chain of a de-reserved product. Second, it uses a more appropriate measure of informal employment than Martin et al. (2017)’s analysis (which is limited to employment in the informal sector ), facilitated by alternate datasets NSS Employment Unemployment Survey and the India Human Development Survey. Finally, it uses exogenous shocks to employment as instruments to estimate the relationship between employment conditions and residential conditions.

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