Trade liberalisation, market power abd scale efficiency in Indian industry
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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96-8, Brown University, Department of Economics.
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