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Liberalization, Market Power, and Productivity Growth in Indian Industry

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  • Pulapre Balakrishnan
  • M. Parameswaran
  • K. Pushpangadan
  • M. Suresh Babu
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    Abstract

    Using firm-level panel data we investigate whether reform of the trade and industrial policy regimes in India introduced in 1991 resulted in a reduction in market power and/or an acceleration in productivity growth, consequences that have been predicted in theory. Econometric testing of the theory for every industry group at the two-digit level in India yielded limited evidence of acceleration in productivity growth and no evidence of a reduction in market power. This is interpreted as suggesting that in the case of Indian industry trade liberalization has not exhibited the potential often attributed to it.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Journal of Economic Policy Reform.

    Volume (Year): 9 (2006)
    Issue (Month): 1 ()
    Pages: 55-73

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    Handle: RePEc:taf:jpolrf:v:9:y:2006:i:1:p:55-73

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    Related research

    Keywords: Economic liberalization in India; trade policy reform; market power; productivity growth;

    References

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    1. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
    2. Richard Blundell & Steve Bond, 1999. "GMM estimation with persistent panel data: an application to production functions," IFS Working Papers W99/04, Institute for Fiscal Studies.
    3. Frank Windmeijer, 2000. "A finite sample correction for the variance of linear two-step GMM estimators," IFS Working Papers W00/19, Institute for Fiscal Studies.
    4. Deb Kusum Das, 2003. "Quantifing trade barriers: Has protection declined substantially in Indian manufacturing?," Indian Council for Research on International Economic Relations, New Delhi Working Papers 105, Indian Council for Research on International Economic Relations, New Delhi, India.
    5. Krishna, Pravin & Mitra, Devashish, 1998. "Trade liberalization, market discipline and productivity growth: new evidence from India," Journal of Development Economics, Elsevier, vol. 56(2), pages 447-462, August.
    6. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," NBER Working Papers 5067, National Bureau of Economic Research, Inc.
    7. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November.
    8. Harrison, Ann E., 1994. "Productivity, imperfect competition and trade reform : Theory and evidence," Journal of International Economics, Elsevier, vol. 36(1-2), pages 53-73, February.
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    Cited by:
    1. Ghosh, Saibal, 2013. "Do economic reforms matter for manufacturing productivity? Evidence from the Indian experience," Economic Modelling, Elsevier, vol. 31(C), pages 723-733.
    2. Dibyendu Maiti, 2013. "Market imperfections, trade reform and total factor productivity growth: theory and practices from India," Journal of Productivity Analysis, Springer, vol. 40(2), pages 207-218, October.
    3. Alexander Coad & Jagannadha Pawan Tamvada, 2008. "The Growth and Decline of Small firms In Developing Countries," Papers on Economics and Evolution 2008-08, Philipps University Marburg, Department of Geography.
    4. Alex Coad & Jaganaddha Tamvada, 2012. "Firm growth and barriers to growth among small firms in India," Small Business Economics, Springer, vol. 39(2), pages 383-400, September.

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