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Entry, Competitiveness and Exports: Evidence from Firm Level Data of Indian Manufacturing

Author

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  • Barua, Alokesh
  • Chakraborty, Debashis
  • Hariprasad, C. G.

Abstract

The industry and trade policy regimes in India have witnessed drastic changes since 1991. The dismantling of the industrial licensing system and thereby allowing free entry to and exit from the industry of firms in 1991 followed by the WTO induced trade liberalization leading to substantial reduction in tariffs and gradual softening of foreign investment regulations, particularly in the context of foreign direct investment since 1995, may have had significant impact on the state of competitiveness in India industries. In this paper an attempt has been made to evaluate the effects of trade and industrial policy changes on domestic competitiveness for select Indian industries during post-liberalization period. Though there exists a pool of empirical literature focusing on the state of competitiveness in India, the link between theoretical models underlying the empirical analysis is not often strong. Moreover, a section of the literature focuses on a combination of firm and industry data for drawing conclusions on firm behavior, which may not reflect the actual scenario. Given this background, the present paper attempts to provide a unified approach to examine the inter-relationships between entry and competitiveness within a consistent oligopolistic market framework. The empirical analysis of the present study, carried out on the basis of firm data for 14 sectors over 1990-2008, indicates that Indian industry have shown considerable changes over the last decade in terms of entry and competitiveness. An overall decline in concentration is witnessed between the two end points, which signify the importance of newer entry in the markets. The Price-Cost Margin however behaves differently for different sectors, which could be explained by the differing level of spillover of technical changes as a result of increased pressure of competition due to liberalization. Demand curve is generally found to be inelastic and declines over the period. The relationship between the size of the firms and their export volume turns out to be significantly positive.

Suggested Citation

  • Barua, Alokesh & Chakraborty, Debashis & Hariprasad, C. G., 2010. "Entry, Competitiveness and Exports: Evidence from Firm Level Data of Indian Manufacturing," MPRA Paper 22738, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:22738
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    References listed on IDEAS

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    Cited by:

    1. Akbar Ullah & Ejaz Ghani & Attiya Y. Javed, 2013. "Market Power and Industrial Performance in Pakistan," PIDE-Working Papers 2013:88, Pakistan Institute of Development Economics.
    2. Sugata Marjit & Moushakhi Ray, 2020. "Asset Level Heterogeneity, Competition and Export Incentives: The Role of Credit Rationing," CESifo Working Paper Series 8208, CESifo.
    3. Marjit, Sugata & Ray, Moushakhi, 2021. "Competition, asset build up and export incentives: The role of imperfect credit market," Journal of Asian Economics, Elsevier, vol. 77(C).
    4. Marjit, Sugata & Ray, Moushakhi, 2017. "Export profitability, competition and technology," International Review of Economics & Finance, Elsevier, vol. 47(C), pages 35-45.

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    More about this item

    Keywords

    Competitiveness; entry; industrial liberalization; trade liberalization;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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