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Determinants of Firm-level Export Performance: A Case Study of Indian Textile Garments and Apparel Industry

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  • T.A Bhavani

    (Institute of Economic Growth)

  • Suresh D. Tendulkar

    (Delhi School of Economics)

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    Abstract

    Drawing on international trade and industrial organisation theories, this paper identifies variable affecting (a) export decision function i.e. to export or sell in domestic market, and (b) export performance function i.e. share of exports in output. These functions are estimated for Garment and Apparel producing units in Delhi. Form of business organisation reflecting access to capital turns out to be a key determinant in both functions. Estimated marginal impact of identified variables (scale and share of sales expenses) on the probability of exporting in estimated Probit model declines sharply in making from single proprietorship to partnership and further to limited companies. On the other hand, every single determinant (scale, share of wages, share of sales expenses and technical efficiency) has found to have increasing marginal impact on export performance in estimated Tobit model in moving across the three forms of business organisation. Empirical results suggest two policy changes to boost export performance. One, given the importance of scale for exports, the existing policy of reserving garments and apparel for exclusive production in small scale units needs to be scrapped. Simultaneously, it is also necessary to amend current labour legislation applicable to large scale factory units as it introduces labour market inflexibility and hence serves as an impediment to expansion of existing units and entry of new units.

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    Bibliographic Info

    Paper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 81.

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    Length: 35 pages
    Date of creation: May 2000
    Date of revision:
    Handle: RePEc:cde:cdewps:81

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    Related research

    Keywords: Tobit Model; Business Organization; Economies of Scale;

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    References

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    1. Edwards, Sebastian, 1993. "Openness, Trade Liberalization, and Growth in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1358-93, September.
    2. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, Elsevier, vol. 19(2-3), pages 233-238, August.
    3. Forsund, Finn R. & Lovell, C. A. Knox & Schmidt, Peter, 1980. "A survey of frontier production functions and of their relationship to efficiency measurement," Journal of Econometrics, Elsevier, Elsevier, vol. 13(1), pages 5-25, May.
    4. Fuss, Melvyn & McFadden, Daniel & Mundlak, Yair, 1978. "A Survey of Functional Forms in the Economic Analysis of Production," Histoy of Economic Thought Chapters, McMaster University Archive for the History of Economic Thought, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 4 McMaster University Archive for the History of Economic Thought.
    5. Fried, Harold O. & Lovell, C. A. Knox & Schmidt, Shelton S. (ed.), 1993. "The Measurement of Productive Efficiency: Techniques and Applications," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195072181, October.
    6. Egan, Mary Lou & Mody, Ashoka, 1992. "Buyer-seller links in export development," World Development, Elsevier, Elsevier, vol. 20(3), pages 321-334, March.
    7. Kravis, Irving B, 1970. "Trade as a Handmaiden of Growth: Similarities between the Nineteenth and Twentieth Centuries," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 80(323), pages 850-72, December.
    8. Suresh D. Tendulkar & T. A. Bhavani, 1997. "Policy on Modern Small Scale Industries: A Case of Government Failure," Indian Economic Review, Department of Economics, Delhi School of Economics, Department of Economics, Delhi School of Economics, vol. 32(1), pages 39-64, January.
    9. Carr, Jack L & Mathewson, G Frank, 1988. "Unlimited Liability as a Barrier to Entry," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(4), pages 766-84, August.
    10. Helpman, Elhanan, 1984. "Increasing returns, imperfect markets, and trade theory," Handbook of International Economics, Elsevier, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 7, pages 325-365 Elsevier.
    11. Jones, Ronald W. & Peter Neary, J., 1984. "The positive theory of international trade," Handbook of International Economics, Elsevier, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 1, pages 1-62 Elsevier.
    12. Bhagwati, Jagdish N, 1988. "Export-Promoting Trade Strategy: Issues and Evidence," World Bank Research Observer, World Bank Group, World Bank Group, vol. 3(1), pages 27-57, January.
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