Page 203 - ES 2020-21_Volume-1-2 [28-01-21]

186 Economic Survey 2020-21 Volume 1

Figure 3: Discretion in the granting of construction
permits increases with de jure provisions

180 Tamil Nadu
Firm-level variation in actual number of days to get a construction permit 120 Maharashtra Madhya Pradesh
160
140

Uttar Pradesh
100
Bihar
80
60
40
West Bengal
20
Karnataka
Punjab
Andhra Pradesh
0
180
200
160
60 80 Assam 100 Kerala Jharkhand 140 Haryana Rajasthan Gujarat Orissa 220 240 260
120
Number of de jure days (days needed to get construction permit as per state
regulatory rules)

Source: Raj et al (2018); Firm level variation is measured by standard deviation; higher variation proxies
higher discretion
Figure 4: Discretion in the granting of operating license
increases with de jure provisions
50 Delhi West Bengal
Firm level variation in actual number of days to get operating license 35 Maharashtra Madhya Pradesh Tamil Nadu Karnataka Kerala
45
40

30
Punjab
25
Rajasthan
Assam
20
Haryana
15
Jharkhand
10
5
0
31
29 Uttar Pradesh 33 35 37 Bihar 39 41
Number of de jure days
(Days needed to get operating license as per State regulatory rules)
Source: Raj et al (2018); Firm level variation is measured by standard deviation
6.12 Kanbur & Ronconi (2016) show in their cross-country study on labor laws that the
stringency of labour regulation (measured as fine for violation of minimum wage) correlates
negatively with the intensity of its enforcement (measured as average medium imprisonment for
the same). They argue that countries with more stringent labour codes are less likely to enforce
them.

6.13 Finally, another illustration of the above thesis is the Dodd-Frank Act enacted post the
Global Financial Crisis in United States, which spanned 848 pages and mandated 390 new
rules. It was a well-intentioned attempt to fix what went wrong in the years leading up to 2008
crisis. One might think that this left little room for regulators to use their discretion. In fact, what
happened was quite the contrary. Petrou (2012) argued that Dodd-Frank created a new kind of