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Does Services Liberalization Affect Manufacturing Firms' Export Performance? Evidence from India

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  • Maria Bas
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    Abstract

    This paper investigates the relationship between the reform of energy, telecommunications and transport services in India in the mid-1990s and manufacturing firms’ export performance. The empirical analysis relies on exogenous indicators of regulation of Indian services sectors and detailed firm-level data from India in the 1994-2004 period. I find that the reform of upstream services sector has increased the probability of exporting and export sales shares of firms producing in downstream manufacturing industries. The results suggest that the effect of services liberalization on manufacturing firms’ export performance is stronger for initially more productive firms. These empirical findings are robust to alternative econometric specifications that control for other reforms, industry, firm characteristics and that deal with potential reverse causality concerns.

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    Bibliographic Info

    Paper provided by CEPII research center in its series Working Papers with number 2013-17.

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    Date of creation: Jun 2013
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    Handle: RePEc:cii:cepidt:2013-17

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    Keywords: Services liberalization; manufacturing firms’ export performance; firm heterogeneity; firm level data;

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    1. Enrica Detragiache & Abdul Abiad & Thierry Tressel, 2008. "A New Database of Financial Reforms," IMF Working Papers 08/266, International Monetary Fund.
    2. Pinelopi Goldberg & Amit Khandelwal & Nina Pavcnik & Petia Topalova, 2009. "Imported Intermediate Inputs and Domestic Product Growth: Evidence from India," Working Papers 1179, Princeton University, Department of Economics, Center for Economic Policy Studies..
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    4. James Levinsohn & Amil Petrin, 2000. "Estimating Production Functions Using Inputs to Control for Unobservables," NBER Working Papers 7819, National Bureau of Economic Research, Inc.
    5. Maria Bas & Antoine Berthou, 2011. "The Decision to Import Capital Goods in India: Firms' Financial Factors Matter," Working Papers 2011-06, CEPII research center.
    6. Renaud Bourlès & Gilbert Cette & Jimmy Lopez & Jacques Mairesse & Giuseppe Nicoletti, 2010. "Do Product Market Regulations in Upstream Sectors Curb Productivity Growth?: Panel Data Evidence for OECD Countries," OECD Economics Department Working Papers 791, OECD Publishing.
    7. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2005. "Importers, Exporters, and Multinationals: A Portrait of Firms in the U.S. that Trade Goods," Working Paper Series, Peterson Institute for International Economics WP05-10, Peterson Institute for International Economics.
    8. Guglielmo Barone & Federico Cingano, 2011. "Service Regulation and Growth: Evidence from OECD Countries," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 121(555), pages 931-957, 09.
    9. Steve Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    10. Eric A. Verhoogen, 2008. "Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 123(2), pages 489-530, 05.
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    12. Bas, Maria & Strauss-Kahn, Vanessa, 2010. "Does importing more inputs raise exports? Firm level evidence from France," MPRA Paper 27315, University Library of Munich, Germany.
    13. Laura Alfaro & Anusha Chari, 2009. "India Transformed? Insights from the Firm Level 1988-2005," Harvard Business School Working Papers 10-030, Harvard Business School.
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    15. Joseph Francois & Julia Woerz, 2007. "Producer Services, Manufacturing Linkages, and Trade," FIW Working Paper series, FIW 002, FIW.
    16. Arnold, Jens & Javorcik, Beata & Lipscomb, Molly & Mattoo, Aaditya, 2010. "Services Reform and Manufacturing Performance: Evidence from India," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8011, C.E.P.R. Discussion Papers.
    17. Fernandes, Ana M. & Paunov, Caroline, 2012. "Foreign direct investment in services and manufacturing productivity: Evidence for Chile," Journal of Development Economics, Elsevier, vol. 97(2), pages 305-321.
    18. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September.
    19. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
    20. Chari, Anusha & Gupta, Nandini, 2008. "Incumbents and protectionism: The political economy of foreign entry liberalization," Journal of Financial Economics, Elsevier, Elsevier, vol. 88(3), pages 633-656, June.
    21. Bas, Maria & Causa, Orsetta, 2013. "Trade and product market policies in upstream sectors and productivity in downstream sectors: Firm-level evidence from China," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 843-862.
    22. Amiti, Mary & Konings, Jozef, 2005. "Trade Liberalization, Intermediate Inputs and Productivity: Evidence from Indonesia," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5104, C.E.P.R. Discussion Papers.
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