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Trade liberalization, imported inputs and factor efficiencies: Evidence from the auto components industry in India

  • Sanghamitra Das

    ()

    (Indian Statistical Institute, New Delhi)

  • Ch. Sambasiva Rao

    ()

    (National Council of Applied Economic Research)

Firm-level data have been used to estimate changes in factor efficiencies_imported inputs being one of them-- over three sub-periods, 1977-84, 1985-91 and 1992-99 respectively denoting eras before liberalization, partial liberalization of the automotive industries and economy-wide liberalization. We see that the average size of firms has increased from that in the protected regime as the degree of liberalization has advanced. We find that the substitutability among inputs changed over the three sub-periods. We also find that the marginal products of all the inputs are very heterogeneous among firms in each period. The distributions of marginal product of labour and domestic materials and has moved to the left in the later periods while that of capital has moved to the right. The distribution of marginal product of imported materials first moved to the right and then to the left as compared to the first period. Overall the smaller firms benefited more in the earlier periods and bigger ones in the last period.

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Paper provided by Indian Statistical Institute, New Delhi, India in its series Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers with number 04-05.

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Length: 21 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:ind:isipdp:04-05
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  1. George S Olley & Ariel Pakes, 1992. "The Dynamics Of Productivity In The Telecommunications Equipment Industry," Working Papers 92-2, Center for Economic Studies, U.S. Census Bureau.
  2. James R. Tybout, 2000. "Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 11-44, March.
  3. Pravin Krishna & Devashish Mitra, . "Trade Liberalization, Market Discipline and Productivity Growth: New Evidence From India," Working Papers 96-8, Brown University, Department of Economics.
  4. Nishimizu, Mieko & Robinson, Sherman, 1984. "Trade policies and productivity change in semi-industrialized countries," Journal of Development Economics, Elsevier, vol. 16(1-2), pages 177-206.
  5. 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.
  6. James Levinsohn & Amil Petrin, 1999. "When Industries Become More Productive, Do Firms?," NBER Working Papers 6893, National Bureau of Economic Research, Inc.
  7. Mundlak, Yair, 1996. "Production Function Estimation: Reviving the Primal," Econometrica, Econometric Society, vol. 64(2), pages 431-38, March.
  8. 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.
  9. Richard M. Auty & Rhys Jenkins, 1995. "Does trade liberalization lead to productivity increases? A case study of Bolivian manufacturing," Journal of International Development, John Wiley & Sons, Ltd., vol. 7(4), pages 577-597, 07.
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