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Trade liberalisation, market power abd scale efficiency in Indian industry

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  • Pulapre Balakrishnan

    (Centre for Development Studies)

  • K. Pushpangadan

    (Centre for Development Studies)

  • M. Suresh Babu

    (Centre for Development Studies)

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    Abstract

    Using information on listed firms in each of the industry groups atthe two-digit level within Manufacturing this study investigates whetherthe radical shift in trade policy in India in 1991 resulted in a reductionin market power and/or an improvement in scale efficiency. We estimatea group-wise production function allowing for firm-specific effects. Aplausible estimate of market power is obtained and the assumption ofconstant returns to scale is mostly rejected. As regards the effects of thetrade-policy shock of 1991, evidence of a move to a more competitivemarket structure or of an improvement in scale efficiency is notwidespread across Indian manufacturing.

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    Bibliographic Info

    Paper provided by Centre for Development Studies, Trivendrum, India in its series Centre for Development Studies, Trivendrum Working Papers with number 336.

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    Length: 44 pages
    Date of creation: Aug 2002
    Date of revision:
    Handle: RePEc:ind:cdswpp:336

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    Keywords: Trade liberalisation; Market power; Scale Economies;

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    1. Susanto Basu & John G. Fernald, 1996. "Returns to scale in U.S. production: estimates and implications," International Finance Discussion Papers 546, Board of Governors of the Federal Reserve System (U.S.).
    2. Boozer, Michael A., 1997. "Econometric Analysis of Panel Data Badi H. Baltagi Wiley, 1995," Econometric Theory, Cambridge University Press, vol. 13(05), pages 747-754, October.
    3. Robert E. Hall, 1986. "The Relation Between Price and Marginal Cost in U.S. Industry," NBER Working Papers 1785, National Bureau of Economic Research, Inc.
    4. James Levinsohn, 1991. "Testing the Imports-as-Market-Discipline Hypothesis," NBER Working Papers 3657, National Bureau of Economic Research, Inc.
    5. Klette, Tor Jakob, 1999. "Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data," Journal of Industrial Economics, Wiley Blackwell, vol. 47(4), pages 451-76, December.
    6. 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.
    7. 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.
    8. Rudiger Dornbusch, 1992. "The Case for Trade Liberalization in Developing Countries," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 69-85, Winter.
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