Environmental Permits, Regulatory Burden, and Firm Outcomes

784/2025 Namrata Kala, Muhammad Haseeb, and James Fenske

Effective regulatory design requires an understanding of how regulatory burden affects regulated entities. Using novel data on all applications for environmental permits in five Indian states and a natural experiment, we estimate how regulatory burden of environmental permitting affects firms. Difference-in-difference estimates show that deregulation induces smaller firms to enter and increases entry. Standard data sources would miss these substantial effects, underscoring the importance of collecting data across the firm size distribution. We also use full texts of permit certificates to create novel measures of regulatory burden. Firms in industries with reduced regulations face fewer, less stringent, permit conditions.

Responsive Public Policy