Entry, Competitiveness and Exports: Evidence from the Indian Firm Data

This paper attempts to evaluate the effects of industrial de-licensing of 1991 and WTO-induced tariff-reforms of 1995 on domestic competitiveness and export performances of the Indian manufacturing during the post-1991. Unlike existing empirical studies not backed by theoretical underpinnings, the paper has been founded on an open-economy-oligopoly-model framework. The paper develops an econometric method of estimating the output from data on sales of the firms, thereby estimating the firms?? marginal cost, which is conducive for the entire empirical analysis with a unified set of firm data. Using firm level data for 14 sectors for the period 1990?C2008, it is observed that there has been an increase in the number of firms resulting in a fall in the concentration ratio and elasticity of demand at the point of equilibrium is generally less than unity and is declining over-time. The panel regression results of increasing exports by bigger firms also conforms the theoretical predictions.     

Do Technological Conditions of Production Explain Industrial Growth? The Indian Manufacturing, 1998–1999 to 2007–2008

The paper tries to assess whether the technological conditions of production can explain the sluggishness in growth in Indian manufacturing industries reflected in a stagnant share in aggregate GDP. For this purpose, the returns to scale and elasticity of factor substitution are estimated for various two-digit manufacturing industries of India for the years 1998–1999 to 2007–2008 using the translog production function specification. Most of the previous research of this kind was undertaken by using either aggregate level time-series or state-wise aggregate cross-section data. The recent availability of factory (plant) level panel data has motivated us to re-estimate the parameters of the production function for the Indian manufacturing using factory-level data. Our results clearly indicate presence of significant scale economies. We observe that the capital-labour elasticity of substitution varies across industries, being a little above one or less than one in nearly half of the cases. A multiple regression analysis has been undertaken with the help of industry-level panel data for the years 1998–1999 to 2007–2008 to find out if the manufacturing growth rate is conditioned by the parameters of the production function. Our results indicate that production function parameters do exert an important influence on the rate of growth.

     

Development Policy Implications for Growth and Regional Inequality in a Small Open Economy: The Indian Case

Inclusive economic development has become a pressing goal of government policy in India in the face of rising regional inequality. This paper examines the role of targeted development policy action in inducing economic growth and also in reducing regional income inequality during the last two decades (since the beginning of the 1990s)—a period marked by increasing trade openness. In our disaggregated analysis of the states, we find that while the government capital expenditure policy has had significant positive impact on output growth of the poorer states, it failed to break the trend of escalating regional inequality. The policy has been significantly more effective in enhancing manufacturing sector output in the poorer states compared with the richer states. On the trade front, while the poorer states gained somewhat in income growth from greater openness, the gains were not large enough to offset the increasing regional disparity.     

Entry liberalization and export performance: a theoretical analysis in a multi-market oligopoly model

This paper is an attempt to demonstrate how the entry (costless) of firms in an industry may have a dramatic effect on exports from an industry in a country. The results have tremendous implications for LDCs suffering from resource and BOP constraints but having reservoirs of cheap labor. The welfare effects of such entry liberalization policy (or subsidy) can be stated from the Bhagwati theorem that a reduction in an only (single) distortion is necessarily welfare improving by reducing monopoly or oligopoly distortions. However, we have shown that the entry liberalization policy is welfare superior to an equivalent subsidy policy where equivalent is defined in terms of the impact on exports. As a by product, we have also shown how one can integrate the oligopoly models of trade with the general oligopoly literature. The results on the limiting behaviour of an open economy oligopoly model extend the standard results in the oligopoly theory in a closed economy.