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This paper studies the impact of the Government of India financed "New Industrial Policy for Uttarakhand and Himachal Pradesh", whereby beginning 2003, new industrial units and existing units upon expansion were given 100% income tax and excise tax exemption. Using a difference-indifferences approach, I find a large increase in employment, number of factories, total output and fixed capital at the 3-digit industry level. Using firm level data, I find that the average employment, output, fixed capital, and additions to plant and machinery increased for existing firms as a result of this policy. Hence I show that the policy change affected both the intensive and extensive margins. I also look at heterogeneity by firm size and find that the policy led to employment and output increases for smaller firms. Finally, I use synthetic control methods (Abadie, Diamond, and Hainmueller (2010)) as a robustness check for the treatment effects of the policy change.

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Zoning laws that restrict rural land to agricultural production pose an important institutional barrier to industrial development. We study the effects of the Industrial Areas (IA) program in Karnataka, India, which rezoned agricultural land for industrial use, but without the economic incentives common with other place-based policies. We find that the program caused a large increase in firm creation and employment in villages overlapping the IAs. Moreover, the surrounding areas experienced spillover effects, with workers shifting from agricultural to non-agricultural employment, and entrepreneurs establishing numerous small-scale service sector and agricultural firms.