IDEAS home Printed from https://ideas.repec.org/a/dse/indecr/v32y1997i1p65-87.html
   My bibliography  Save this article

Effect of the Rate of Return Regulation on Optimality of Input Use, Productivity and Profitability of Firms in the Indian Automobile Industry

Author

Listed:
  • Hrushikesh Panda

    (Institute of Economic Growth)

Abstract

Important conclusions of the paper are that contrary to theoretical expectation, regulation on rate of return to capital (RORC) did not result in a greater than optimal degree of capital intensity of production of firms. Firms also had an incentive in terms of an increase in profit margin (PTM) to bring about growth in total factor productivity (TFP). After deregulation, because of competitive pressures, there was a negative effect of TFP on PTM of the medium and heavy commercial vehicle producing firms. Though they operated in monopoly markets, firms, in general, did not earn monopoly rent because of the regulation on RORC. However, given lags in adjustment of prices of vehicles to changes in the average cost of production, changes in input prices had a negative effect on PTM. The regulation on RORC was on individual firm basis and was such that in the car segment, a more efficient firm earned a lower PTM.

Suggested Citation

  • Hrushikesh Panda, 1997. "Effect of the Rate of Return Regulation on Optimality of Input Use, Productivity and Profitability of Firms in the Indian Automobile Industry," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 32(1), pages 65-87, January.
    • Handle: RePEc:dse:indecr:v:32:y:1997:i:1:p:65-87
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item

    JEL classification:

    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L61 - Industrial Organization - - Industry Studies: Manufacturing - - - Metals and Metal Products; Cement; Glass; Ceramics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:dse:indecr:v:32:y:1997:i:1:p:65-87. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Pami Dua (email available below). General contact details of provider: https://edirc.repec.org/data/deudein.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.