Productivity growth has long been associated with, among others, contestability of markets which, in turn, is dependent on the ease with which potential competitors to the incumbent firms can enter the product market. There is a growing consensus that in emerging markets regulatory and institutional factors may have a greater influence on a firm’s ability to enter a product market than strategic positions adopted by the incumbent firms. We examine this proposition in the context of India where the industrial policies of the eighties and the nineties are widely believed to be pro-incumbent and procompetition, respectively, thereby providing the setting for a natural experiment with 1991 as the watershed year. In our analysis, we also take into consideration the possibility that the greater economic federalism associated with the reforms of the nineties may have affected the distribution of industrial units across states after 1991. Our paper, which uses the experiences of the textiles and electrical machinery sectors during the two decades as the basis for the analysis, finds broad support for both these hypotheses.
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Length: pages Date of creation: 01 Nov 2006 Date of revision: Handle: RePEc:wdi:papers:2006-843
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Simeon Djankov & Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2002.
"The Regulation Of Entry,"
The Quarterly Journal of Economics,
MIT Press, vol. 117(1), pages 1-37, February.
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Simeon Djankov & Rafael La Porta & Florencio LopezdeSilanes & Andrei Shleifer, 2000.
"The Regulation of Entry,"
NBER Working Papers
7892, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Djankov, Simeon & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2001.
"The Regulation of Entry,"
Working Paper Series
rwp01-015, Harvard University, John F. Kennedy School of Government.
[Downloadable!]