We examine the effects of the threats to property rights on the economic performance of the manufacturing sector in Indian states. We constructed indices of the threats using data on crime against property rights. In our analysis, we correct for the problem of underreporting of crimes in official crime data. The results of our instrumental variable estimation show that not only threats to private property but also to contracts adversely affect the performance of the manufacturing sector in India. We also extend our basic model to examine the effects of kidnapping and the scale economies of property rights protection.
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