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Competition and Profitability in Indian Manufacturing Industries

Author

Listed:
  • K. Pushpangadan

    (Centre for Development Studies, Trivandrum 695011, India)

  • N. Shanta

    (Centre for Development Studies, Trivandrum 695011, India)

Abstract

The paper examines empirical evidence on the dynamic view of competition in Indian manufacturing industries using Mueller’s auto-profit equations. The competitive profit rate for all industries is estimated to be 5 % and the average firm-specific rent 4.2 %. The observed average profit rate, 7.5 %, is thus 50% higher than the competitive rate. The estimate of the average strength of competition in the manufacturing sector shows that it takes 0.9 years for the deviation of profit rates from the norm to reduce to its half level. When compared with the findings of the studies for the pre-liberalisation period, the competitive environment in the Indian manufacturing sector is found to have deteriorated in the post - liberalisation period.

Suggested Citation

  • K. Pushpangadan & N. Shanta, 2008. "Competition and Profitability in Indian Manufacturing Industries," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 43(1), pages 103-123, July.
  • Handle: RePEc:dse:indecr:v:43:y:2008:i:1:p:103-123
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    Cited by:

    1. Pal, Rupayan & Rathore, Udayan, 2016. "Estimating workers’ bargaining power and firms’ markup in India: Implications of reforms and labour regulations," Journal of Policy Modeling, Elsevier, vol. 38(6), pages 1118-1135.

    More about this item

    Keywords

    Competition; Persistence of Profit Rates; Static and Dynamic;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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