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Does Openness Promote Competition? A Case Study of Indian Manufacturing

Author

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  • Pant, Manoj
  • Pattanayak, Manoranjan

Abstract

This paper uses firm level data for the period 1989-2001 to analyse the working of competition in India’s manufacturing sector. It examines the impact of greater competition on profit mark-up over the last decade. The econometric analysis of the factors determining markup indicates that, contrary to received wisdom, trade openness by itself does not act to reduce the profit mark-up. The paper also investigates the degree of competitiveness defined as the Lerner price-cost margin. The analysis indicates that the estimated margins are in general high over the 1990s across all industries and in most of the industries considered these margins have been increasing over the second-half of the 1990s. The market by itself does not bring about competitive outcomes. The regulatory agencies probably have a crucial role to ensure a level playing field.

Suggested Citation

  • Pant, Manoj & Pattanayak, Manoranjan, 2005. "Does Openness Promote Competition? A Case Study of Indian Manufacturing," MPRA Paper 2871, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:2871
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    References listed on IDEAS

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    1. Levinsohn, James, 1993. "Testing the imports-as-market-discipline hypothesis," Journal of International Economics, Elsevier, vol. 35(1-2), pages 1-22, August.
    2. James R. Tybout, 2000. "Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 11-44, March.
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Ashish Kumar Sedai, 2019. "Wages in Imperfect Markets: A Post-reforms Study of Indian Manufacturing," Journal of South Asian Development, , vol. 14(3), pages 257-280, December.
    2. V. Pradeep & Mita Bhattacharya & Jong-Rong Chen, 2017. "Spillover Effects of Research and Development, Exports and Foreign Investment on Productivity," Journal of South Asian Development, , vol. 12(1), pages 18-41, April.
    3. Manoranjan Pattanayak Author- Workplace-Name: CRISIL LIMITED & Manoj Pant, "undated". "Corporate Governance, Competition and Firm Performance: Evidence from India," Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi Discussion Papers 10-07, Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi, India.
    4. Sandwip Kumar Das & Manoj Pant, 2006. "Measuring market imperfection in the manufacturing sector: Theory and evidence from India," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(1), pages 63-79.
    5. Manoj Pant & Manoranjan Pattanayak, 2010. "Corporate Governance, Competition and Firm Performance," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 9(3), pages 347-381, December.
    6. Hariprasad Govinda, 2016. "Competition, Openness and Inequality of Firm Size in the Indian Manufacturing," Foreign Trade Review, , vol. 51(1), pages 81-97, February.
    7. Khanna, Rupika & Sharma, Chandan, 2022. "Impact of information technology on firm performance: New evidence from Indian manufacturing," Information Economics and Policy, Elsevier, vol. 60(C).
    8. Paramjit Singh & Kriti Sharma, 2024. "Degree of Monopoly and Distribution of Income in India’s Organised Manufacturing Sector," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 67(1), pages 129-155, March.
    9. Jatinder Singh, 2011. "Inward Investment and Market Structure in an Open Developing Economy: A Case of India’s Manufacturing Sector," Journal of Economics and Behavioral Studies, AMH International, vol. 2(6), pages 286-297.

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    More about this item

    Keywords

    Competition; Indian Manufacturing;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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