Judicial quality and regional firm performance: The case of Indian states

Higher quality institutions help a firm to invest in institutional-dependent inputs, which might affect a firm's performance. I use data for Indian manufacturing that matches state-by-state firm-level data with state-by-state data on particularly important institution - Judicial quality. Results show that judicial quality is a significant determinant of higher firm performance - both for exports and domestic sales. My most conservative estimate suggests that a 10% increase in judicial quality of a region helps to increase the sales of a firm by 1-2%. I explicitly control for the 'selection' effect by using a two-step Average Treatment Effect (ATE) procedure. The results also support my initial findings. My results are robust to a battery of robustness checks.