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Domestic Competition Spurs Exports

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  • Tushar Poddar
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    Abstract

    India''s exports nearly tripled in the 1990s. Decomposing export growth shows that it has been driven by incumbent firms rather than the entry of new firms. By using a new panel on Indian firms and estimating a dynamic discrete-choice model of the firm''s decision to export, we find evidence that economic liberalization has led to greater domestic competition, spurring firm efficiency and increasing Indian firms'' competitiveness and ability to export. We show that export growth has been an outcome of local firm innovation which has come about due to increased competitive pressure from FDI entry.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/173.

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    Length: 29
    Date of creation: 01 Sep 2004
    Date of revision:
    Handle: RePEc:imf:imfwpa:04/173

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    Related research

    Keywords: Trade; Economic models; export growth; export intensity; exporters; export behavior; competitive pressure; export performance; export market; exporting success; export concentration; export activity; domestic market; domestic firms; trade liberalization; exporter; trade reforms; world exports; export catalysts; export markets; total exports; share of exports; export incentives; international trade; economic liberalization; domestic competition; services exports; anti-export bias; exporting firms; export expansion; export market share; manufactured exports; value of exports; export success; multinational enterprises; exports of goods; domestic exporters; share of world exports; import prices; tariff rates; trade flows; export supply; export bias; export data; export status; export share; multinational firms; trade performance; nontariff barriers; tariff changes; employment growth; export experience; quantitative restrictions; import penetration; fostering productivity; competitive industry; fostering competition; local exporters; annual export growth; domestic economy; trade volumes; impact of trade; export good; changes in trade; imperfect competition; trade reform; political economy; weighted tariff; foreign ownership; balance of payments crisis; export requirements; domestic companies; transport services; output growth; export entry; world investment; factor endowments; multiple markets; increasing competitiveness;

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    References

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    1. Sofronis K. Clerides & Saul Lach & James R. Tybout, 1998. "Is Learning By Exporting Important? Micro-Dynamic Evidence From Colombia, Mexico, And Morocco," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 903-947, August.
    2. Andrew Bernard & Joachim Wagner, 1997. "Exports and success in German manufacturing," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 133(1), pages 134-157, March.
    3. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
    4. Jonathan E. Haskel & Sonia C. Pereira & Matthew J. Slaughter, 2002. "Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?," NBER Working Papers 8724, National Bureau of Economic Research, Inc.
    5. Fernandes, Ana M., 2003. "Trade policy, trade volumes, and plant-level productivity in Colombian manufacturing industries," Policy Research Working Paper Series 3064, The World Bank.
    6. Arellano, Manuel, 1989. "An efficient GLS estimator of triangular models with covariance restrictions," Journal of Econometrics, Elsevier, vol. 42(2), pages 267-273, October.
    7. Dixit, A., 1988. "Entry And Exit Decisions Under Uncertainty," Papers 91, Princeton, Department of Economics - Financial Research Center.
    8. Girma, Sourafel & Wakelin, Katharine, 2001. "Regional Underdevelopment: Is FDI the Solution? A Semiparametric Analysis," CEPR Discussion Papers 2995, C.E.P.R. Discussion Papers.
    9. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
    10. Baldwin, Richard, 1988. "Hyteresis in Import Prices: The Beachhead Effect," American Economic Review, American Economic Association, vol. 78(4), pages 773-85, September.
    11. Keane, Michael P & Runkle, David E, 1992. "On the Estimation of Panel-Data Models with Serial Correlation When Instruments Are Not Strictly Exogenous," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(1), pages 1-9, January.
    12. Richard Baldwin & Paul R. Krugman, 1986. "Persistent Trade Effects of Large Exchage Rate Shocks," NBER Working Papers 2017, National Bureau of Economic Research, Inc.
    13. Tybout, James R. & Westbrook, M. Daniel, 1995. "Trade liberalization and the dimensions of efficiency change in Mexican manufacturing industries," Journal of International Economics, Elsevier, vol. 39(1-2), pages 53-78, August.
    14. Ahn, Seung C. & Schmidt, Peter, 1995. "Efficient estimation of models for dynamic panel data," Journal of Econometrics, Elsevier, vol. 68(1), pages 5-27, July.
    15. F. Zilibotti & P. Aghion & R. Burgess, 2004. "The Unequal Effects of Trade Liberalization: Theory and Evidence from India," 2004 Meeting Papers 40, Society for Economic Dynamics.
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    Cited by:
    1. Kaushik Bhattacharya, 2006. "Monetary policy approaches in India," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in Asia: approaches and implementation, volume 31, pages 74-102 Bank for International Settlements.
    2. Chiara Franco & Subash Sasidharan, 2009. "MNEs and Export Spillovers : An Analysis of Indian Manufacturing Industries," Trade Working Papers 22938, East Asian Bureau of Economic Research.
    3. Franco, Chiara & Sasidharan, Subash, 2010. "MNEs, technological efforts and channels of export spillover: An analysis of Indian manufacturing industries," Economic Systems, Elsevier, vol. 34(3), pages 270-288, September.
    4. Baboo M. Nowbutsing & Sonalisingh Ramsohok, 2012. "The rise of China: a new fear of trade competition for Mauritius?," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 5(2), pages 91-106, June.
    5. Bank for International Settlements, 2006. "Monetary policy in Asia: approaches and implementation," BIS Papers, Bank for International Settlements, number 31, May.

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